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TURKEY: Sell-Side Views on Timing of First Rate Cut Mixed Following June CPI

TURKEY
  • Goldman Sachs say that while they expect some acceleration in sequential inflation in July due to regulatory changes and some normalisation in core goods inflation, they think underlying inflation will continue to weaken in H2 (bringing headline inflation to 36% y/y by year-end). With continued disinflation, Goldman Sachs think monetary policy can be eased relatively quickly given the pressures building on the TRY to appreciate. They continue to expect the first rate cut at the end of Q3.
  • JP Morgan expect headline inflation to fall towards 60% y/y in July and 50% in August on the back of strong favourable base effects. They have lowered their end-2024 inflation forecast to 42.5% (from 43.5%) and end-2025 inflation forecast to 25% (from 25.2%) as the downside surprise yesterday was mainly driven by core items.
  • HSBC have also revised down their inflation forecasts to account for yesterday’s data release and now see end-2024 and end-2025 CPI at 44.6% and 27.7%, respectively, from 48.0% and 29.0% previously. Their base-case scenario for monetary policy remains for unchanged rates throughout the year. They forecast the real policy rate to be significantly positive as of November, but for now continue to think that rate cuts commencing in Q4 could be somewhat premature.
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