MNI CBRT Review - January 2025: A Steady Easing Pace
Note: Re-published to include sell-side views.
Executive summary:
- The CBRT delivered another 250bp rate cut, taking the one-week repo rate to 45%.
- The accompanying policy statement maintained the “meeting-by-meeting” guidance but dropped reference to monthly inflation.
- Among sell-side, easing is generally expected to continue in March unless inflation momentum picks up significantly.
See the full review here:
A slight tweak in communication came via the lack of reference to monthly inflation, which until now had been a key measure of price growth. The statement now says a tight monetary policy stance is seen being maintained “until price stability is achieved via a sustained decline in inflation,” rather than “until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range.”
Going forward, surging liquidity in the banking system could prove to be a key determinant behind the central bank’s easing pace. Local press have focussed particularly on the recent rise excess liquidity to above TRY 1trln, an issue which they say could lead implementation of additional measures. Moreover, a lower cost of sterilising this excess liquidity would provide additional justification for a more aggressive rate-cutting pace.