Türkiye | The CBRT keeps a similar tone to Sep MPC

Summary

The Central Bank (CBRT) kept the policy rate, keeping a tone similar to September MPC, despite the negative surprise of the September inflation. We maintain our first rate cut expectation in December with a 250 bps cut, where the timing and magnitude would depend on how the monthly inflation trend is improving.

Key points

• Key points:
• The CBRT maintains its communication with expectations for an improvement in inflation trend. They evaluate domestic demand as approaching disinflationary levels, most likely referring to their clearer view on a negative output gap most recently.
• They stress increasing uncertainty regarding the pace of improvement in inflation in light of incoming data, potentially emphasizing September’s negative surprise and may be to some extent a still worrisome October inflation.
• We understand the CBRT remains cautious but still expects some improvement in the next months’ inflation and they just stress that the level of improvement is not clear. As a result, we evaluate they maintain a tone similar to the September MPC decision, where they had started to soften their communication for a gradual easing cycle.
• High inflation expectations and uncertainties stemming from wage and price adjustments at the beginning of 2025 require a cautious stance.
• Therefore, we expect a gradual monetary easing with still a restrictive stance and credit growth caps especially on consumer loans to continue for a while under the assumption of a fiscal policy becoming tight in 2025 as noted in the Medium Term Program (MTP).

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