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Goldman Sachs See 100bp CBRT Cuts at Remaining 2022 Meetings

  • In line with the unanimous consensus, Goldman Sachs expect the committee to cut its policy rate by 100bp to +11.00%. In both of its last two MPC meetings, the TCMB delivered a 100bp cut, bringing down its policy rate from +14.00% to +12.00%, and cited the importance of supportive financial conditions to preserve growth momentum amid slower activity in Q3.
  • President Erdogan has stated that he sees rates falling to single digits by next year. Based on Goldman’s view that the TCMB repo rate is largely disconnected from the monetary policy stance, they think the Bank is likely to continue cutting rates to further signal that policy will not be tightened. Hence, they forecast 100bp of cuts every meeting until year-end.
  • Despite the rate cuts, funding and macro prudential policies have remained restrictive so far. Nevertheless, Goldman think this is likely to be reversed closer to next year’s election and possibly via additional government spending, given the relative availability of fiscal space in Turkey. The primary question remains on the timing and extent of further changes to policy.

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