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JPMorgan said Türkiye’s inflation outlook gives the Central Bank of the Republic of Türkiye (CBRT) room to begin cutting interest rates in September, according to Matriks Haber.
The bank said July inflation data coming in below expectations, weakening inflation momentum and an improvement in the current account balance created space for the central bank to begin rate cuts without making a fundamental change to its exchange rate policy.
JPMorgan analysts said in a daily investor note that they maintained a long position in the Turkish lira and expected authorities to continue allowing the lira’s real appreciation as part of the disinflation program.
According to BloombergHT, JPMorgan economist Fatih Akcelik expects the CBRT to resume one-week repo auctions next month, then cut the policy rate by 100 basis points each in October and December.
That would bring the policy rate to 35% by year-end.
In the Aug. 21 note, JPMorgan forecast monthly inflation of 1.9% in August, led by fuel prices, while its annual headline inflation forecast stood at 31.6%.
Akcelik said tight financial conditions were expected to continue weighing on household consumption.
JPMorgan identified market positioning as the main risk, estimating that foreign-sourced carry trade positions had reached about $47 billion, rising above levels seen before the Iran conflict.
The bank said that could reduce markets’ capacity to absorb negative surprises from domestic politics, inflation or energy prices.
It also said financial measures that U.S. Treasury Secretary Scott Bessent is expected to announce against Iran on Monday are being closely monitored, adding that those expectations had contributed to recent outflows from the lira.
According to JPMorgan’s forecast, the current depreciation trend may continue for now.
The main test is expected to come when rate cuts begin and when the seasonal effect on the current account reverses around November.
JPMorgan said the CBRT would closely monitor the behavior of local investors and may need to maintain monetary policy tight enough to preserve the attractiveness of lira deposits.
The note said the absence of a significant shift from lira deposits to the dollar among households so far could allow gradual easing without disrupting the exchange rate framework.
In its overall assessment, JPMorgan said it was still comfortable holding a long position in the Turkish lira, while warning that high positioning abroad had left the margin for error narrow.
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