The Turkish central bank’s upcoming interest rate decision is expected to mark the start of a new rate-cutting cycle and is being closely watched as the main item on the market agenda, as disinflation continues and market turmoil has largely faded.
Next Thursday’s meeting of the Monetary Policy Committee (MPC) is expected to see the Central Bank of the Republic of Türkiye (CBRT) kick off a renewed easing cycle with a 250 basis-point rate cut, according to a survey and a Wall Street bank.
All but one of the 17 economists in a Reuters poll forecast the central bank to cut the policy rate at the July 24 meeting. The median forecast was for a 250 basis-point cut to 43.50%, with predictions ranging from 42.50% to 44.50% among those expecting an easing step.
Thirteen respondents expected a cut of 250 basis points, while one predicted the bank to hold rates at 46%.
Most expect rate cuts to continue in the months ahead, with the policy rate falling to 36% by the end of 2025, according to the median of 17 forecasts.
The monetary easing is likely to continue through at least the third quarter of 2026, an earlier Reuters poll of economists showed.
If delivered, the move would mark the first cut since a surprise 350 basis-point hike in April, which reversed an earlier easing cycle. That tightening helped stabilize markets after the jailing of Istanbul Mayor Ekrem Imamoğlu sent Turkish assets and the lira sharply lower in March.
Imamoğlu was arrested pending trial over graft charges.
Morgan Stanley also expects a 250 basis-point cut this month, followed by three additional cuts of the same size to bring the policy rate to 36% by year-end.
“While we expect a rise in the monthly inflation trend in July due to administered price adjustments, we expect this to be temporary given weaker domestic demand (negative output gap) and our expectation for the bank to deliver prudent rate cuts to keep the monetary stance tight,” the bank said.
Aggressive monetary tightening since mid-2023, combined with favorable energy prices, has helped reduce Türkiye’s annual inflation rate by more than half over the past year.
The inflation lastly dipped to 35.05% in June. The better-than-expected print renewed expectations that the central bank would begin cutting rates again.
Monthly inflation was 1.37%, with price declines in key categories such as food and beverages reinforcing the central bank’s view that a disinflation trend is taking hold.
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