Close
newsletters Newsletters
X Instagram Youtube

Morgan Stanley sees Türkiye rate cuts from July, year-end at 36%

Exterior view of Morgan Stanleys headquarters in Times Square, New York City, on July 5, 2022. (Adobe Stock Photo)
Photo
BigPhoto
Exterior view of Morgan Stanleys headquarters in Times Square, New York City, on July 5, 2022. (Adobe Stock Photo)
July 05, 2025 02:46 PM GMT+03:00

New York-based investment bank Morgan Stanley expects the Central Bank of the Turkish Republic (CBRT) to start cutting interest rates by July and projects the policy rate to drop to 36% by the end of 2025, according to a note released by the bank.

The bank’s latest analysis, authored by Hande Kucuk, follows the release of Türkiye’s June inflation figures, which extended the decline to 35.05%, and comes ahead of the Central Bank’s next policy meeting on July 24.

The report noted that headline inflation came in slightly lower than expected, though core inflation remained somewhat elevated.

Line chart shows the monthly trend in Türkiye's annual inflation rate (CPI) from June 2024 to June 2025, updated on July 5, 2025. (Chart by Onur Erdogan/Türkiye Today)
Line chart shows the monthly trend in Türkiye's annual inflation rate (CPI) from June 2024 to June 2025, updated on July 5, 2025. (Chart by Onur Erdogan/Türkiye Today)

First rate cut likely in July

The bank anticipates that the Turkish central bank will begin easing monetary policy in July with a 250 basis point cut. This would mark the first rate reduction since the bank raised its policy interest rate to 46% in April, from 42.5%, surprising markets at the time.

The CBRT held the policy rate steady in June, in line with market expectations. However, Morgan Stanley believes the conditions now support a cautious start to rate cuts.

The chart compares Türkiye’s annual inflation rate and the Central Bank's policy interest rate between May 2024 and June 2025, updated on July 5, 2025. (Chart by Onur Erdogan/Türkiye Today)
The chart compares Türkiye’s annual inflation rate and the Central Bank's policy interest rate between May 2024 and June 2025, updated on July 5, 2025. (Chart by Onur Erdogan/Türkiye Today)

Gradual easing path outlined through year-end

Morgan Stanley’s projection outlines three additional 250 basis point cuts in September, October, and December, bringing the total expected reduction to 1,000 basis points. If realized, this would bring the policy rate down to 36% by the end of the year.

“We expect the disinflation trend to continue,” the report stated, “but considering relatively flat inflation in June and upcoming regulated price adjustments, we believe the CBRT will begin cutting rates cautiously in July.”

Inflation expected to decline over summer

Morgan Stanley maintained its year-end inflation forecast at 29%, citing a slowdown in domestic demand, improving inflation expectations, and favorable base effects in July and August. The bank emphasized that risks remain balanced in both directions.

July 05, 2025 02:46 PM GMT+03:00
More From Türkiye Today