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The Central Bank of the Republic of Türkiye (CBRT) is expected to leave its policy rate unchanged at its September meeting, with rate cuts likely to begin in October and continue in December, according to the U.S.-based Morgan Stanley.
In a note following the CBRT’s resumption of one-week repo auctions this week, which lowered average funding costs from 40% to 37%, the bank also noted that weaker-than-expected inflation next week could bring forward the easing cycle.
The CBRT’s Monetary Policy Committee (MPC) is scheduled to announce its next policy-rate decision on Sept. 10, after keeping the rate unchanged at 37% for four consecutive meetings.
Meanwhile, annual inflation fell to 31.8%, even as monthly price growth accelerated to 1.8% in July.
The Turkish Statistical Institute (TurkStat) is due to release the August inflation figures on Sept. 3, with market participants expecting monthly inflation of 1.7% and the annual rate to ease to 31.3%, according to the CBRT’s latest survey.
Morgan Stanley, however, forecasts August consumer prices to rise 2.1% from the previous month, pushing annual inflation to 31.8%, a reading that would call for a more cautious policy stance.
Market forecasts remained cautious on the timing of the CBRT’s easing cycle, with several major institutions still expecting the policy rate to end 2026 at 35%.
JPMorgan expected 100-basis-point cuts in October and December, while maintaining its 35% year-end forecast. It also projected August monthly inflation at 1.9% and annual inflation at 31.6%.
Bank of America, meanwhile, expected the CBRT to leave rates unchanged on Sept. 10 before delivering a 100-basis-point cut in October, which would have taken the policy rate to 36% by year-end. BofA also kept its year-end inflation forecast at 29.5%.
ING expected the CBRT to move its policy rate toward 35% in the fourth quarter, while warning that persistent pricing pressures, oil prices and geopolitical risks could have limited the pace of monetary easing.
HSBC took a more dovish stance, expecting the CBRT to resume rate cuts in September and projecting the one-week repo rate to fall to 34% by year-end. The bank also noted that the restart of weekly repo auctions could reinforce expectations for a September cut, while regional geopolitical risks could still constrain the pace of easing.
The CBRT will convene two more scheduled MPC meetings before the end of the year, on Oct. 22 and Dec. 10, following its September meeting.
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