MNI CBRT Preview - December 2022: Easing Cycle Concludes, Prolonged Pause Due

Executive Summary:

• The CBRT is largely expected to hit pause on their cutting cycle this month, maintaining the one-week repo rate at 9.00%
• Anticipated pause in the repo rate follows a 150bp cut in November, which brought the policy stance in line with Erdoğan’s calls for single digit rates by year-end
• Focus for December meeting has shifted to the release of the 2023 Monetary and Exchange Rate report

MNICBRTPrevDec22.pdf

November’s accompanying policy statement was explicit in signalling that the easing cycle has concluded, with the bank stating that “the current policy rate is adequate and decided to end the rate cut cycle that started in August”. This will likely remain the case through year-end and well into 2023 as market focus turns to the presidential elections in June.

Since March 2021, Governor Kavcıoğlu has overseen 1000bps of rate cuts for the CBRT, clearly going against the trend of global monetary tightening. Markets perceive this as suggestive of political motivation during the current period of rapid inflation. The bank has argued that global economic weakness, domestic and international recession risks as well as waning foreign demand is necessitating further monetary loosening.