Brokerage Firms' Expectations for Central Bank of Turkey's Interest Rate Decision Following Inflation Data
The recently announced inflation data for November has raised various expectations regarding the interest rate policy that the Central Bank of the Republic of Turkey (CBRT) may adopt in December. Market analysts and investment institutions, taking into account different economic indicators and the CBRT's previous statements, are forecasting potential interest rate decisions that may be made in the upcoming Monetary Policy Committee (MPC) meeting.
Discussions continue concerning the extent of expected rate cuts in December in light of rising food prices, the coordination of monetary and fiscal policies, inflationary trends, and market expectations. We have compiled assessments made by some brokerage firms and financial analysts following the recent inflation data and their expectations regarding the CBRT's potential interest rate decisions.
Kuveyt Türk Investment: The Coordination of Monetary and Fiscal Policies is Important Kuveyt Türk Investment noted that the November Consumer Price Index (CPI) exceeded expectations. It is stated that the monthly CPI has declined to around 1%. The institution values the synchronized movement of monetary and fiscal policies as well as the anchoring of inflation expectations and emphasizes that they maintain their expectations for a 100 basis point rate cut in December.
Tacirler Investment: Food Prices are Not an Obstacle for Rate Cuts Tacirler Investment pointed out that inflation is significantly above the CBRT's target. They express that it is not likely for monthly inflation to fall to 1.5% by the last quarter of 2025. The high level of food prices is not seen as an obstacle to rate cuts, and they believe a rate reduction could begin in December. However, they indicate that it could start with a reduction of less than 250 basis points according to market expectations.
Info Investment: Expectations for Rate Cuts are Increasing Info Investment reports that the market's initial reaction to the inflation data was negative, but rapid purchases led by the banking sector followed. They state that the CBRT did not change interest rates the previous month, and the dovish tone of the presentation has increased expectations for a rate cut in December. Highlighting the importance of the coordination between monetary and fiscal policies, they maintain their expectation for a 250 basis point rate cut.
Colendi Securities: Slowdown in Core Inflation Colendi Securities reported that the CPI in November increased by 2.24% on a monthly basis and recorded a yearly increase of 47.09%. The slowdown in core inflation indicators increases the probability of the CBRT making a rate cut. Colendi Securities believes that a 200 basis point cut is the main scenario for the upcoming meeting in December.
Alnus Investment: High Inflation Expectations are Impacting Alnus Investment stated that the monthly inflation was above expectations and revised their year-end annual CPI expectation to 45.20%. They mention that the effects of food, transportation, and housing expenditure groups will be decisive in December. Alnus Investment indicates that pricing related to external factors could affect the CPI and that they would revise their forecasts accordingly.
Ahlatcı Investment: Observations on Consumer and Producer Inflation Ahlatcı Investment reported that the consumer inflation for November exceeded expectations with an increase of 2.24% and was recorded at 47.09% annually. The brokerage firm noted that there has been a continued positive decline in producer inflation, leaving the door open for the CBRT's interest rate cut expectations.