Central Bank's Inflation Statement: Will Interest Rate Cuts Slow Down?

CBRT Announcement: Meetings Held with Investors

The Central Bank of the Republic of Turkey (CBRT) officials held one-on-one meetings with foreign investors in the United States last week. In these meetings, signals were received that inflation concerns are increasing and the pace of interest rate cuts may slow down.

Monetary Policy Committee Meeting and Interest Rates

During the annual meetings of the International Monetary Fund (IMF) and the World Bank held in Washington, CBRT President Fatih Karahan and his assistants did not provide any clues to investors regarding how much the interest rate cut cycle could be slowed down. Following the 300 basis point cut in July and the 250 basis point cut in September, investors are closely monitoring the decisions to be made at the Monetary Policy Committee (MPC) meeting scheduled for October 23.

Disinflation Process and Market Expectations

CBRT officials emphasized that they will closely monitor market expectations during the meetings. In this context, the aim to tackle permanent price increases observed in recent months was expressed. The CBRT's concerns about the slowdown in the disinflation process in economic data continue to reflect in the markets.

Economists' Predictions

Following the annual inflation rate of 33.3% in August, which exceeded expectations, and reaching a peak of 75.4% last year, economists anticipate that the CBRT will implement a 100 basis point cut in interest rates at the October meeting in order to slow down the pace of interest rate cuts. According to survey results, it is expected that the policy rate will decrease from 40.50% to 39.50%.

Views in the Survey and Public Reflections

However, there is also some confusion among these predictions. Among the 17 economists participating in the survey, four indicated that there will be no interest rate cut, while five economists expect a cut of 150 basis points, and two expect a cut of 250 basis points. Karahan emphasized that the recent slowdown in the downward trend of inflation is an important development, while he also did not neglect to underline that the current monetary policy will continue to be implemented tightly to ensure price stability.