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[Turkish Central Bank Takes a Hawkish Stance, Vows to Tighten Policy if Economic Slowdown Fails to Prevent Worsening Inflation] ⑴ The Central Bank of Turkey released its latest policy statement on Tuesday, clearly declaring that it will prudently determine the policy interest rate level at each meeting based on the achieved and expected inflation path, refusing to provide the market with any pre-set easing timetable. ⑵ The central bank acknowledged in the statement that economic activity indicators are pointing towards a slowdown, but immediately emphasized in stronger terms that the potential erosion of the inflation outlook by the second round of recent geopolitical and price volatility will be the top priority in assessing the monetary policy stance. ⑶ The policymakers drew a clear red line: if the inflation outlook shows a significant and persistent deterioration, the monetary policy stance will not hesitate to shift towards tightening, completely extinguishing any market illusions that economic weakness will force the central bank to tolerate high inflation. ⑷ The statement repeatedly reiterated the central bank's extremely vigilant stance on the upside risks to inflation, implying that even if economic activity cools, as long as the price stability target is threatened, sacrificing short-term growth to defend the lira's purchasing power and anti-inflation credibility will be a policy choice that will not be hesitated. (5) Against the backdrop of continued pressure on the Turkish lira and no easing of imported inflationary pressures, the central bank's hawkish statement suggests an attempt to manage market expectations in advance and curb further decoupling of inflation expectations. However, the gap between the slowing real economy and the hardline policy stance is widening. (6) In the coming months, the market will closely watch the central bank's specific definition of the vague threshold of "significant and persistent deterioration." If the shock from Middle Eastern energy prices continues to unfold and inflation readings refuse to fall, the Turkish central bank may be forced to rub salt into the wound of an already stalled economy.