While the Central Bank of the Republic of Turkey left the policy rate at 37 percent at the Monetary Policy Committee meeting in September, all eyes turned to the markets. While the Central Bank did not make any new changes in the policy rate, which was reduced from 38 percent to 37 percent in January, the decision came immediately after the announcement of the new Medium Term Program. In the MTP, the year-end inflation forecast for 2026 was determined as 28.4 percent, while 21 percent inflation was predicted for 2027, 13.5 percent for 2028 and 9 percent for 2029. Analyzes point out that interest rate cut expectations in the markets have shifted to the last two meetings of the year.
6 POINT DIFFERENCE
One of the headlines that attracted attention after the announcement of the new MTP was the difference between inflation forecasts for 2027. While the Central Bank announced the inflation forecast for 2027 as 15 percent in the Inflation Report published on August 13, the MTP published approximately three weeks later included an inflation forecast of 21 percent for the same year. Thus, there was a 6-point difference between the Central Bank’s prediction and the 2027 prediction in the MTP. Economy and Economics Expert Barlas Yurtsever pointed out that the difference between the two figures is important for the course of monetary policy in the coming period. Yurtsever stated that the inflation path to be followed in the coming period will become even more important after the policy rate is kept constant at 37 percent.
MARKET EXPECTATION HAS NOT CHANGED
The Central Bank’s September decision largely coincided with market expectations before the decision. While 24 of the 25 economists who participated in AA Finance’s survey expected the policy rate to be kept constant at 37 percent, the median of the economists’ year-end policy rate expectation was 35 percent. In the CNBC-e survey, the median expectation of 19 participants for September was 37 percent, and the year-end expectation was 35 percent. While 21 of the 27 economists who participated in the matrix survey expected interest rates to be kept constant, 5 economists predicted a 100 basis point cut and one economist predicted a 300 basis point cut.
EXPECTATION IS IN THE LAST TWO MEETINGS
According to analysts, after the interest rate was kept constant, discount expectations in the markets turned towards the remaining two Monetary Policy Committee meetings of the year. Economists’ evaluations also highlighted the expectation that limited interest rate reductions might come to the fore, especially in October and December. ING economists pointed out that although August inflation remained below expectations, energy prices and global developments continued to pose risks to the inflation outlook. While the Institution evaluates that the slowdown in domestic demand may create a limited loosening area in monetary policy in the last quarter of the year, He predicted that the policy rate could drop to 35 percent at the end of the year with two reductions of 100 basis points each. Economist Haluk Bürümcekçi also evaluated that an interest rate cut at the September meeting would be premature, and stated that if the year-end inflation was around 30 percent, the policy rate could be reduced to 35 percent.
