Financial Institutions expect a rate cut from Turkey’s Central Bank on September 23

The International Finance Institute (IIF) has announced that it expects the Central Bank of Turkey to start expected interest rate cuts by 50 basis points on September 23, with a total of 200 basis points of interest rate cuts for the rest of the year.

Eyes are turned to the interest rate decision to be announced by the Central Bank (CBRT) on September 23, while those who expect a rate cut from the bank are increasing.

The International Finance Institute (IIF) announced on September 23 that it expected a 50 basis point interest rate cut from the CBRT.

Stating that growth concerns in Turkey seem to outweigh inflation, and therefore they expect a total interest rate reduction of 200 basis points for the rest of 2021, IIF predicted that the discount cycle would begin on September 23.

IIF also announced that it expected a 200 basis point interest rate cut in 2022.

IIF said despite ongoing increase in inflation, core inflation had went down to 16.8 in August and that Central Bank of Turkey had announced that it would focus on core indicators of inflation. Thus IIF explained it predicted a decrease in inflation with a base effect in November and December, and parallel additional interest rate cuts.

IIF, which predicts that with interest rate cuts, banks will reduce their loan interest rates and credit demand will increase, assumed that in the base scenario, the reduction of asset purchases by US and European central banks will not have much negative impact on Turkish assets.

PRESIDENT ERDOGAN HAD SIGNALED A DISCOUNT

The market was shaken by the statement made by CBRT President KAVCIOGLU at the German-Turkish Chamber of Commerce and Industry Meeting on September 8.

In his previous statements, KAVCIOGLU had said “We will pay interest above the expected and realized inflation” and changed his rhetoric after the headline consumer inflation exceeded the CBRT policy interest rate of 19 percent by seeing 19.25 percent.

He had then said “Especially exceptional conditions that arise due to the pandemic, increase the importance of core inflation indicators. The elements that can influence the demand of monetary policy, core inflation developments and their medium-term inflation to remain consistent with the target in relation to the analysis in addition, in the coming period, a little more weight will be given to the impact of the unbundling of supply shocks.”

ERDOGAN HAD ANNOUNCED HIS REQUEST AT THE BEGINNING OF AUGUST

 “We are also reducing interest rates” the President and AKP President Erdogan had said on a television program he attended on August 4. “There is no high interest. High interest will bring us high inflation. Low interest will bring low inflation. August is the breaking point. We will switch to low inflation in August.”