The verdict is almost in: the Turkish lira is overcoming its headwinds.

After the results of Turkey’s constitutional referendum in mid-April, the Turkish lira bounced around in indecision. Against the U.S. dollar, the indecision ended in conjunction with the April 28th release on monetary policy from the Central Bank of the Republic of Turkey (CBRT). In that release the CBRT increased its inflation forecast and sounded a relatively upbeat outlook for the Turkish economy.

The CBRT revised upward its inflation forecasts for year-end 2017 by 0.5 points to 8.5%. The year-end forecast for 2018 increased 0.4 points to 6.4%. The CBRT expects inflation to peak from here: “Inflation is expected to reach the highest levels in April-May particularly due to the base effect from unprocessed food and the lagged effects of the exchange rate, and then to fall thereafter as the impact of last year’s price increases in energy, alcohol-tobacco products and food gradually diminishes.” Yet, the CBRT does not feel compelled to take specific anti-inflationary measures because it expects existing tight monetary policy to “support the disinflation process.”

The forecasts likely were forced upward because of the recent surge in inflationary pressures:

“Consumer inflation has surged since November 2016 and rose above the upper band of January forecasts. The upward trend in inflation was largely driven by the depreciation in the Turkish lira and the rise in import prices in addition to the increase in food prices. The rapid depreciation in the Turkish lira spread across the consumer price index, particularly to energy and durable goods items.”

The inflation push did not prevent the CBRT from issuing a relatively optimistic outlook on the economy:

“In sum, the recently released data indicate a gradual recovery in the economic activity. Domestic demand conditions display a moderate improvement and demand from the European Union economies continues to contribute positively to exports. With the supportive measures and incentives provided recently, the economic activity is expected to gain further pace in the forthcoming period. However, the course of capital flows in line with uncertainties regarding global economic policies, geopolitical developments, the subsided course of the labor market and the lingering volatility in exchange rates may stand out as factors to limit the pace of growth in 2017…

Downside risks to economic activity have recently abated. The growth outlook for 2017 is expected to be more favorable compared to 2016 which was subject to numerous concurrent adverse shocks.”