MNI CBRT WATCH: Rates To Hold As Inflation Forecast Raised
MNI (LONDON) - The Central Bank of The Republic of Turkey is expected to keep its benchmark one-week repo rate unchanged when it meets on Thursday after it raised inflation forecasts, even as comments by President Recep Tayyip Erdogan rekindled speculation of a rate cut early next year. (See MNI EM CBRT WATCH: Policy To Hold As Monthly Inflation Ticks Up)
Inflation is now expected at 44% this year and 21% next year - versus the 38% and 14% seen in August - before falling to 12% in 2026, the CBRT said earlier this month, though it noted signs of a slowdown in domestic demand.
High food prices, underlying inflation and the slower-than-expected decline in household inflation expectations all contributed to the revision in November’s Inflation Report, Governor Fatih Karahan said, with services inflation proving especially sticky.
Karahan is expected to maintain the hawkish tone seen since coming to office in February. The 1W repo rate was hiked 500bps to its current 50% level in March, since when he has consistently outlined the need for a “significant and sustained decline in the underlying trend of monthly inflation” before easing can begin.
But while investor speculation regarding the possibility of an “early” 2025 rate faded in October, comments made by president Recep Tayyip Erdogan indicating that inflation has shown clear signs of decline over the past two months and will no longer be an issue next year have once again brought the subject to the fore. (MNI EM INTERVIEW: Conditions Right For CBRT Cut -Ex-Deputy Turhan)