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Bank of America (BofA) economists expect the Central Bank of the Republic of Türkiye (CBRT) to initiate its first interest rate cut in July rather than June, according to a research note published Wednesday.
In the analysis authored by the bank economists, the timing of the anticipated monetary easing is identified as a key factor that could determine whether the Turkish economy experiences a so-called "hard landing"—a rapid economic slowdown following tight monetary policy. The economists warned that if the CBRT delays rate cuts until September or later, the likelihood of a recession could increase.
The note also emphasized that the CBRT's decision-making will be influenced not only by inflation dynamics but also by trends in the country's foreign exchange reserves, which serve as a critical buffer against financial instability.
Türkiye’s annual inflation declined for the 11th consecutive month in April, falling to 37.89%, while total international reserves dropped to $141.05 billion as of April 25.
Referring to the macroprudential measures recently introduced by the CBRT over the weekend—tools used by central banks to mitigate systemic financial risks—the report stated that these measures are expected to help maintain the central bank’s net reserves at positive levels at least until seasonal factors come into play in July.
The report underscored that the CBRT's decisions regarding interest rates would remain data-dependent, noting: "If disinflation continues and reserve accumulation resumes, the central bank may proceed with rate cuts. Accordingly, we have revised our base-case scenario to expect the first cut in July instead of June, and we now project the year-end policy rate at 38%, up from our previous forecast of 36%."
However, the analysts cautioned that any upward surprise in inflation or sustained domestic demand that continues to pressure the current account deficit—a measure of a country’s trade balance, including net income and direct payments—could push the rate cut timeline further into September. They reiterated that elevated uncertainty persists and that monetary policy decisions will ultimately be guided by evolving economic indicators.
In April, the CBRT raised its benchmark interest rate by 350 basis points to 46%, marking the first hike in 13 months as part of its ongoing disinflation strategy aimed at bringing inflation under control.
BofA also confirmed that it has revised its year-end policy rate forecast upward to 38%, reflecting a more cautious outlook on inflation and external balances.
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