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TURKEY: Goldman Sachs, HSBC Still Expect Rates to Be Held Until Q1-2025

TURKEY
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  • Following the updated inflation report released on Friday, Goldman Sachs think that the CBRT’s guidance regarding its framework around the cutting cycle remains unchanged: the CBRT will focus on mainly on anchoring inflation expectations and preventing re-dollarisation and an unwarranted acceleration in loan growth rather than on any neutral real rate assumption.
  • They continue to expect the CBRT to start lowering its policy rate in January (-100bp), with risks skewed towards a later start of the cutting cycle from the persistence in the underlying inflation trend.
  • HSBC note that the bank's previous guidance was that ambitious inflation forecasts were helpful in anchoring inflation expectations at a lower level. Given this, the decision to revise up the end-2025 inflation forecast comes as a slight surprise but does not change the big picture, in their view.
  • HSBC still believe policymakers would like to soft-land the economy. More front-loaded and more aggressive monetary and fiscal tightening would likely have helped deliver a faster pace of disinflation, but the associated growth costs would have been larger. They continue to expect the easing cycle to start in Q1-2025.
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  • Following the updated inflation report released on Friday, Goldman Sachs think that the CBRT’s guidance regarding its framework around the cutting cycle remains unchanged: the CBRT will focus on mainly on anchoring inflation expectations and preventing re-dollarisation and an unwarranted acceleration in loan growth rather than on any neutral real rate assumption.
  • They continue to expect the CBRT to start lowering its policy rate in January (-100bp), with risks skewed towards a later start of the cutting cycle from the persistence in the underlying inflation trend.
  • HSBC note that the bank's previous guidance was that ambitious inflation forecasts were helpful in anchoring inflation expectations at a lower level. Given this, the decision to revise up the end-2025 inflation forecast comes as a slight surprise but does not change the big picture, in their view.
  • HSBC still believe policymakers would like to soft-land the economy. More front-loaded and more aggressive monetary and fiscal tightening would likely have helped deliver a faster pace of disinflation, but the associated growth costs would have been larger. They continue to expect the easing cycle to start in Q1-2025.