Morgan Stanley: Turkey Inflation and Interest Rate Forecasts Updated

Important Predictions for the Turkish Economy from Morgan Stanley

Morgan Stanley has revised its year-end inflation forecast for Turkey upward in light of high inflation data. The unexpected increase in September inflation figures has indicated further signs of slowing in the disinflation process.

Year-End Inflation Forecast

As a result of these developments, strategists stated that they have raised their year-end inflation forecast from 30% to 31.5%.

Food Prices and 2026 Expectations

The report expressed the belief that food supply will return to normal by 2026, and this situation will positively affect inflation figures in the fourth quarter of 2026. In this context, year-end inflation forecasts for 2026 are maintained at 26%.

Central Bank's Interest Rate Decisions

The slowdown in core inflation suggests that the Central Bank may slow the pace of interest rate cuts in its upcoming meeting in October. Morgan Stanley has revised its October interest rate cut forecast for the Central Bank from 200 basis points to 150 basis points. In this context, the Central Bank is expected to make a total 150 basis points interest rate cut over two meetings.

As a result, it is projected that the policy rate will decline to 37.50% by the end of 2025 and 26.50% by the end of 2026.