The Monetary Policy Committee of Turkey kept its set of policy interest rates unchanged on 25 October (including the one-week repo rate at 24%), even though inflation had surged to 24.5% y/y in September. Markets have reacted calmly so far, with the TRY slightly up and long-term interest rates slightly down since the move. However, the ISE 100 stock market index has continued its downtrend since 18 October, reflecting the weakening real economy. Business confidence deteriorated further in October. The Services Sector Confidence Index fell to 75.7 points, the lowest level since records began in 2011 (after it had dropped to 79.4 in September from 88.0 in August). Retail Trade Confidence declined to a new low of 87.0 in October. Construction Sector Confidence edged up to 58.7 in October (from 57.3 in September) but this is still the second lowest score since 2011. We expect a hard landing of the economy with just +0.4% growth in 2019 (after +3.3% in 2018).
