Deutsche Bank reported that the Central Bank of the Republic of Turkey (CBRT) emphasizes a data-driven approach in future monetary policy decisions and points to a conscious and measured easing cycle in its 2025 monetary policy outlook.
Investment bank Deutsche Bank shared an evaluation note following yesterday’s CBRT’s 250 basis point interest rate cut decision.
In the note, it was reminded that the CBRT reduced the policy rate by 250 basis points to 47.5 percent and included the following statements:
“It points to the beginning of an easing cycle after maintaining the policy rate at 50 percent since March. Although the expectation of a rate cut in December was widespread, the size of the rate cut was uncertain as market forecasts varied between 150 basis points and 250 basis points. Therefore, the 250 basis point cut is at the upper limit of expectations In addition, the CBRT will reduce the number of Monetary Policy Committee (MPC) meetings from 12 to 8 in 2025. “So the larger reduction is less surprising given that it has announced larger adjustments may be made per meeting during the easing cycle.”
In the note, it is reminded that the CBRT decided to determine the overnight borrowing and lending rates with a margin of -/+ 150 basis points compared to the one-week repo auction interest rate, and that this narrowing corridor indicates a more cautious approach regarding future interest rate decisions and this situation is reflected in the MPK It was noted that, combined with the decrease in the number of meetings, it was a signal of a more hawkish tendency within the policy framework.
Looking ahead, the 2025 monetary policy outlook points to a conscious and measured easing cycle, the note said.
The note stated that Deutsche Bank maintained its forecast of 25.4 percent for end-2025 inflation and 30 percent for the policy rate, and included the following evaluation:
“Given the CBRT’s emphasis on a data-driven approach in future policy decisions, the easing cycle may not be a simple process. The high inflation momentum at the beginning of the year, the seasonally increasing need for foreign exchange in the winter months and the increasing uncertainty regarding the inflation outlook made the CBRT more cautious in the first quarter.” For this reason, after the CBRT set the policy rate at 45 percent in January, we expect the easing cycle to continue at a rate of 250 basis points per meeting after the first quarter and to increase the policy rate. We estimate that it will reach 30 percent by the end of 2025.”
The note also emphasized that the development of inflation dynamics, global risk appetite and portfolio preferences of local investors will be of key importance in terms of the timing and size of discounts in the coming period.
