MNI CBRT Review - June 2024: Rates, Hawkish Tone Unchanged

Executive Summary:

• The Central Bank of Turkey left its one-week repo rate unchanged at 50%, a decision in-line with unanimous sell-side consensus.
• The policy statement offered few surprises, maintaining the hawkish stance which has been present in previous editions. Specifically, the central bank reiterated that it stands ready to raise rates should inflation dynamics warrant.
• Among sell-side, rate cuts are seen commencing no sooner than the end of Q3.

See the full review, with a summary of sell-side analyst views, here:

MNICBRTRevJun24.pdf

The CBRT left its one-week repo rate unchanged at 50%, in line with consensus expectations, offering few surprises in its communication. The bank noted that the underlying trend of inflation deteriorated temporarily in May and continues to identify a number of upside risks to the inflation outlook, namely high and sticky services inflation, high inflation expectations, geopolitical risks and elevated food prices. At the same time, it acknowledges that recent indicators confirm that domestic demand continues to slow down, albeit still at inflationary levels.

Given there will be no minimum wage increase in 2H, analysts expect inflation to moderate sharply in the summer months, largely on the back of base effects. Broadly, this is seen facilitating rate cuts later in the year, though among sell-side, views on the timing of the central bank’s first rate cut are mixed. No analyst view we have seen foresees a rate cut any earlier than the end of Q3.