Headline inflation has remained at uncomfortably high levels across the region, at the same time as activity in industrial and service sectors is beginning to wane. This underscores the policy dilemma facing the monetary authorities. On the one hand, any perceived failure of central banks to deal with rising prices could risk the credibility of inflation-targeting monetary regimes. On the other, if the authorities hike interest rates, they might risk stopping economic recovery in its tracks. As it happens, we continue to believe that the main factors behind most of the upward price pressure – higher world prices of food and fuel – will start to fade by the end of the year. The exception remains Turkey, where a booming economy, accelerating inflation and a widening current account gap will increase pressure to raise rates in the second half of this year.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services