Publications

The CBRT maintained the policy rate (37.0%) and the bands of the interest rate corridor (35.5%-40.0%), parallel to the expectations. The CBRT seems to view the recent geopolitical risks as temporary and believes its current policy toolkit is sufficient to mitigate these risks for now.

Consumer prices rose by 2.96% m/m in February, bringing annual inflation to 31.5% and marking a pause in disinflation. The recent energy price shock and persistent price pressures create upside risks to our 25% year-end forecast, though higher real rates and a potential fuel pricing mechanism could help limit these risks.

Hard data show a faster deceleration in 4Q25, suggesting an annual GDP growth of around 3% and implying modest downside risk on our 3.7% forecast for 2025. We keep our 2026 GDP growth forecast at 4%, but evaluate risks might turn upside given the easing bias of the CBRT and our expectation of a neutral fiscal balance.

Decelerated disinflation trend provides limited room for TL funding costs to fall noticeably; and for banks' NIMs to improve more gradually than expected. As banks will manage spreads with credit rates, newly introduced overdraft loan & credit card limitations are further tightening steps which will negatively impact P&Ls.

BRSA and CBRT have tightened macro-prudential measures further. The increasing pace of retail & SME NPL inflows will decelerate again with the additional BRSA restructuring decision and potential CGF packages in 1Q26.

The CBRT surprised positively and reduced the policy rate by 100bps to 37.0%, below our expectation and consensus of 150bps, with also a similar size of cuts in the corridor (35.5%-40.0%).

As financial conditions became more supportive in 4Q25, credit growth has gained momentum in both retail and TL commercial segments. The CBRT has relaxed the TL deposit rules which will positively affect NIMs together with the expected fall in interest rates in 2026.