UPDATE - FOREX NEWS SURVEY - Economists expect the CBRT to cut rates by 150 basis points this month

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UPDATE - FOREX NEWS SURVEY - Economists expect the CBRT to cut rates by 150 basis points this month

Foreks - (Ata Yatırım has revised its December forecast. We are republishing the updated survey.

Foreks News TCMB interest rate survey has concluded. The median expectation regarding the Turkey Central Bank's (TCMB) Monetary Policy Committee (MPC) meeting in December suggests that the interest rate will be reduced from 50.00% to 48.50 basis points. Economists express the possibility that with the start of interest rate cuts, TCMB may also narrow its interest rate corridor.

In the Foreks News survey, 7 out of 25 economists predicted that the benchmark interest rate would be reduced by 150 basis points, 6 predicted a reduction of 250 basis points, 4 predicted 200 basis points, and another 4 predicted 100 basis points. 4 economists argued that the weekly repo rate would remain unchanged at 50.00%.

  • Interest rate reduction expectations have shifted from January to December. Economists predict that the first interest rate decision will occur in December, with a reduction of 150 basis points. In the previous survey period, forecasts indicated that the first interest rate decision would be in January with a reduction of 250 basis points. Among 25 economists, 21 expressed expectations for a rate cut in this month's meeting, 3 in January 2025, and 1 in February 2025. The expectations for the reduction range between 100 basis points and 250 basis points.

When asked, "Do you expect an interest rate cut in 2025?" all 23 economists answered "yes." In response to the question, "Do you expect an interest rate hike in 2025?" all 16 economists answered "no."

The median estimate for the end of 2025 stands at 30.00%, with an expectation range between 40.00% and 28.00%. In last month’s survey, the expectation was at 30.00%, with an expectation range of 40.00% to 26.00%.

The year-end consumer price index expectation of 17 analysts was realized at 45.20%. The maximum expectation for the CPI was 46.00%, and the minimum was 45.00%. In the previous survey, the year-end inflation expectation was 45.00%. The prediction range was between 47.50% and 43.30%.

Economists' expectations for the CPI at the end of 2025 indicate a 28.00% increase. In the previous month’s survey, expectations showed an increase of 26.80%.

  • Economist Expectations Hande Şekerci, Head of the Research Department at İş Portföy, mentioned that they expect the Central Bank to lower the policy interest rate by 150 basis points in December, stating, "The Central Bank raised the policy interest rate to 50% with a 5-point increment in March and previously expanded the interest rate corridor, which was +/-150 basis points, establishing the overnight lending rate at 47% and the borrowing rate at 53%. We think that with the start of interest rate cuts in this meeting, TCMB may also narrow its interest rate corridor." Hande Şekerci pointed out that the corridor could be redefined around the policy interest rate with a symmetric 150 basis points, and stated, "With a 150 basis points reduction in the policy interest rate, we expect the overnight borrowing rate to be set at 47% and the borrowing rate at 50%."

Looking at the recent developments in market liquidity and Central Bank funding, Şekerci recalled that the average funding cost between April and early September was seen close to the upper band of the corridor on certain days, and stated the following regarding the interest rate decision and inflation expectations:

"Since September 10, the funding cost has been equal to the policy interest rate level, and a surplus of TL liquidity has been continuing in the market for a long time. Considering the unchanged lower band of the interest rate corridor and the market's position regarding the excess TL liquidity, this could serve as a lower limit and support the cautious initiation of interest rate cuts. The seasonally adjusted average of the last three months for headline CPI inflation was limited to a slight increase, standing at 2.74% as of November, while the core C indicator remained stable at 2.66%. The recent slightly resistant trend in the trimmed inflation calculation suggests cautious initial interest rate reductions. We expect annual inflation to be around 42% in January and to finish the first quarter at about 39%. TCMB may pause interest rate cuts in some months depending on the inflation outlook during this period. We estimate that the policy interest rate will drop to 31% by year-end."

The Turkey Central Bank's interest rate decision will be announced on Thursday, December 26, at 14:00.

-TCMB MPC Interest Rate Meeting Schedule December 26, 2024 January 23, 2025 February 20, 2025 March 20, 2025