MNI CBRT Preview - October 2024: No Cuts Until Next Year
Executive summary:
- The CBRT is expected to keep the one-week repo rate unchanged at 50% and maintain a hawkish tilt to communication following the upside to surprise to inflation in September.
- Broad consensus over the timing of the first rate cut has shifted, with all analysts surveyed in this document now expecting the first cut to come no sooner than in Q1-2025.
- Guidance in the policy statement will be closely scrutinised, with a hawkish tilt to communication on the cards following the more dovish pivot last month.
See the full preview, with a summary of sell-side analyst views, here:
The latest set of inflation data warrants a more careful approach to monetary policy – albeit real rates have now entered positive territory for the first time in three years – given that the headline figure came in above-expectations at +49.38% Y/Y (down just moderately from +51.97% in August), while core stayed hot at +49.10%. More concerning will be the month-on-month print, which came in at +2.97%. The central bank has clearly, and repeatedly, stated that a sustained decline in this series combined with a sustained fall in household inflation expectations are pre-conditions for easing.
Governor Fatih Karahan said monthly inflation needs to slow “permanently and significantly” while inflation expectations need to converge with the central bank’s outlook. “We assess that there’s some distance to go in both criteria. Therefore, we will continue to preserve a tight monetary policy,” he said.