Experts predict that the Central Bank of the Republic of Turkey (CBRT) will keep its policy rate at 50% for a long time and may start interest rate cuts at the earliest in the last quarter of the year or in the first quarter of 2025.
The Monetary Policy Committee (MPC) of the CBRT kept the policy rate, which is the one-week repo auction interest rate, unchanged at 50%.
The Central Bank kept the policy rate at 50% AA Finance analyst and economist Haluk Bürümcekçi emphasized in his evaluation that the inflation forecasts in the inflation report and the inflation predictions in the Market Participants Survey continued to remain far apart from each other.
Bürümcekçi said, “The monthly inflation trend developments and the course of future inflation expectations will continue to be important in terms of whether these forecasts will change in the upcoming period and in the Inflation Report to be published in early May.”
Stating that additional tightening in financial conditions and monetary policy is expected to contribute to the disinflation path, Bürümcekçi said that if additional tightening is observed in fiscal policy, this trend could strengthen.
Bürümcekçi used the following expressions: “In this regard, while we do not expect an increase in the policy rate in May, we believe that it will be maintained at 50% for a long time. The length of this period will depend on the developments in the inflation trend and the compatibility of inflation expectations with the CBRT scenario.”
Piotr Matys, Senior FX Analyst at In Touch Capital Markets, said, “After last month’s surprise 500 basis point rate hike, it was widely expected that the CBRT would keep rates unchanged today.”
Matys reiterated that the CBRT has reaffirmed its commitment to maintaining a tight monetary policy as long as necessary, stating that the Bank has regained a significant portion of its credibility by significantly raising interest rates.
Matys emphasized that many market observers are likely to agree that Turkish policymakers under the leadership of CBRT Governor Fatih Karahan should not rush to lower interest rates.
Stating that being very patient and making a good start in 2025 may be more appropriate, Matys commented, “However, the easing process in monetary policy could also start at the end of 2024.”
“CBRT confirmed its hawkish stance” Marek Drimal, Societe Generale’s Central and Eastern Europe, Middle East, and Africa Strategist, noted that the CBRT kept its policy rate stable in line with market expectations.
Drimal stated that there was no surprise announcement in the CBRT’s policy text and said that the Bank confirmed its “hawkish” stance.
Although headline inflation is expected to peak in May, Drimal stated that the CBRT believes it will not need to further tighten policy in the coming months. Drimal said, “The CBRT may keep the policy rate at 50% until the end of the year, and there may be a 500 basis point cut in the policy rate in the first quarter of 2025.”
Drimal said, “We believe that with the seasonal improvement in the current account, the effect of the CBRT’s hawkish stance, and the effect of increasing interest rates, the lira will strengthen against the dollar in the coming months.”
source: aa.com.tr/ prepared by Melisa Beğiç