Evaluations of economists on Central Bank’s interest rate decision
Experts anticipate that the Central Bank of the Republic of Turkey (CBRT) will maintain its policy rate at 50% for a prolonged period, with the earliest possibility of starting interest rate cuts in the last quarter of the year or the first quarter of 2025.
The Monetary Policy Committee (MPC) of the CBRT decided to keep the policy rate, which is the one-week repo auction interest rate, unchanged at 50%.
An analyst and economist emphasized the continued discrepancy between the inflation forecasts in the inflation report and those in the Market Participants’ Survey. He stated, “In the upcoming period and in the Inflation Report to be published in early May, the monthly inflation trend developments and the trajectory of future inflation expectations will continue to be important in terms of whether these forecasts will change.”
ADDITIONAL TIGHTENING IN FINANCIAL CONDITIONS AND MONETARY POLICY EXPECTED TO CONTRIBUTE TO INFLATION PATH
He also mentioned that additional tightening in financial conditions and monetary policy is expected to contribute to the disinflation path, and if there is further tightening in fiscal policy, this trend could strengthen.
He went on tı say, “In this context, while we do not expect an increase in the policy rate in May, we believe that it will be maintained at 50% for a long time. The duration of this period will depend on the conformity of the inflation trend and inflation expectations with the CBRT scenario.”
Another senior analyst I capital markets, commented, “Following last month’s surprise 500 basis point rate hike, the CBRT’s decision to keep rates unchanged today was widely expected.”
He noted that the CBRT had reiterated its commitment to maintaining a tight monetary policy as long as necessary, stating that the Bank has regained a significant portion of its credibility by substantially raising interest rates. He emphasized that many market observers were likely to agree that Turkish monetary policy makers, led by CBRT Governor Fatih Karahan, should probably not rush to start lowering interest rates.
Matys suggested that being very patient and starting off well in 2025 might be more appropriate, while also noting that the easing process of monetary policy could potentially begin towards the end of 2024.
A strategist of a prominent banking group also stated that the CBRT had kept its policy rate unchanged in line with market expectations.
