Eyes on Central Bank's Interest Rate Decision in Domestic Markets

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Eyes on Central Bank's Interest Rate Decision in Domestic Markets

Domestic markets are eagerly awaiting the interest rate decision to be made during the Monetary Policy Committee (MPC) meeting of the Central Bank of the Republic of Turkey (CBRT) today. The timing and magnitude of the expected beginning of the rate-cutting cycle are being watched closely. It is anticipated that the CBRT's approach will align with the policies of global central banks such as the U.S. Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of Japan (BOJ).

Market participants predict a rate cut in the range of 150-250 basis points. With the inflation rate expected to decrease to 47.10% by the end of November and the policy rate at 50%, the CBRT has a maneuvering room of 300 basis points. While the base effect of CPI expected in January is noted to be positive, the tax and wage increases are expected to create negative impacts. These factors are increasing the likelihood of the CBRT triggering an interest rate cut.

Furthermore, comments have been made regarding the dovish tone of the CBRT in the decision text published after the previous meeting, strengthening expectations for a rate cut in December. A survey of market participants conducted last week indicated that the end-of-year interest rate expectation is 48.51%, with a strong anticipation for a 150 basis point cut.

The number of MPC meetings is decreasing

The CBRT's recent statements regarding 2025 have also drawn attention. It was reported that the MPC will hold eight meetings next year, and it was stated that the exchange rate would fluctuate outside of technical adjustments. The gradual termination of the Currency Protected Deposit (CPD) application is seen as part of the simplification of monetary policy.

Global markets remain calm

In global markets, the week is quiet due to the holidays. Many markets were closed for the Christmas holiday, and the hawkish Fed policies were the theme of the previous week. The yield on U.S. 10-year Treasury bonds tested a six-month high, rising to 4.64%.

Domestically, the minimum wage for 2025 was set at 22,104 TL with a 30% increase, impacting the markets. This increase is considered a factor that raises the likelihood of the CBRT deciding to cut rates in today’s meeting. A rate cut decision at the upper limit of expectations, 250 basis points, may indicate positive reflections in the BIST 100 index.