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TURKEY: JP Morgan Expect CBRT To Cut At 250bp Per Meeting Pace From January 2025

TURKEY
  • JP Morgan now expect the CBRT to keep the policy rate higher for longer, with the first 250bp rate cut coming in January 2025, rather than November 2024 forecasted previously. They see the CBRT cutting by 250bp in each MPC meeting through August 2025 to 30%, although risks are for smaller rate cuts and pauses in case of significant inflationary pressures from minimum wage and administered price hikes.
  • Fiscal policy is still inflationary as the cash budget deficit widened to 4.2% of GDP in August, up from 2.4% of GDP at end-2023. The pace of disinflation in 4Q24 and 2025 will depend on whether the fiscal stance turns contractionary.
  • On the back of today’s higher-than-expected inflation data, JPM revise up their end-2024 inflation forecast to 43.5% y/y (from 42.5%) and end-2025 inflation forecast to 25.5% y/y (from 25.0%). They expect subdued monthly services prices to keep monthly inflation below 2% in October and will monitor to what extent real appreciation of the lira and a slowdown in economic activity will offset the price hikes indexed to realised inflation in 4Q24.
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  • JP Morgan now expect the CBRT to keep the policy rate higher for longer, with the first 250bp rate cut coming in January 2025, rather than November 2024 forecasted previously. They see the CBRT cutting by 250bp in each MPC meeting through August 2025 to 30%, although risks are for smaller rate cuts and pauses in case of significant inflationary pressures from minimum wage and administered price hikes.
  • Fiscal policy is still inflationary as the cash budget deficit widened to 4.2% of GDP in August, up from 2.4% of GDP at end-2023. The pace of disinflation in 4Q24 and 2025 will depend on whether the fiscal stance turns contractionary.
  • On the back of today’s higher-than-expected inflation data, JPM revise up their end-2024 inflation forecast to 43.5% y/y (from 42.5%) and end-2025 inflation forecast to 25.5% y/y (from 25.0%). They expect subdued monthly services prices to keep monthly inflation below 2% in October and will monitor to what extent real appreciation of the lira and a slowdown in economic activity will offset the price hikes indexed to realised inflation in 4Q24.