The Central Bank of the Republic of Turkey (CBRT) will hold its first monetary policy committee (MPC) meeting of the year on Thursday, as markets anticipate further action following December’s surprise rate cut—the first in nearly two years, reads a Daily Sabah report.
Independent economists and polls suggest the CBRT is likely to reduce its policy rate by another 250 basis points (bps) this week, bringing it down to 47.5%. Last month, the bank slashed the rate from 50%, marking the end of a prolonged tightening cycle that had persisted from mid-2023 to early 2024.
In a poll conducted by Anadolu Agency (AA), all 17 economists predicted a 250 bps cut. Similarly, Bloomberg HT’s survey of 25 institutions unanimously forecasted the same reduction.
Turkiye’s annual inflation eased to 44.38% in December, aligning with the CBRT’s year-end projection. This represents a significant drop from 75.5% in May last year.
Economists’ median projection for the 2025 year-end policy rate stands at 30%, with estimates ranging between 25% and 35%, according to surveys by AA and Bloomberg HT. This marks a slight adjustment from earlier projections of 31%.
The MPC meeting will take place against a backdrop of improving inflation expectations. The CBRT’s January survey revealed that 12-month inflation expectations had fallen to 25.38%, down from 27.07%.
Treasury and Finance Minister Mehmet Simsek emphasized the importance of maintaining this momentum, stating on X, "It is vital that the improvement in expectations continues to reduce rigidities. We will support the fight against inflation with demand-side policies and supply-side measures in areas like food, housing, and energy."
CBRT Governor Fatih Karahan reiterated the bank's commitment to bringing inflation down to 21% by year-end. Speaking in Eskişehir last week, he credited tight monetary policy, real appreciation of the Turkish lira, and improved inflation expectations for strengthening the disinflation process.
Karahan also highlighted fiscal policy coordination as a critical contributor to achieving the bank’s inflation goals. “With the measures taken in the first phase, we prevented inflation from escalating further,” he said.
In a presentation to investors in London, Karahan noted that household inflation expectations are also improving, signaling progress in broader sentiment.
Karahan underscored that the CBRT’s monetary policy stance will remain tight until inflation expectations and monthly trends show significant and lasting improvement. He emphasized that the policy rate will be set at a level necessary to ensure disinflation aligns with projections.
“The committee will base its decisions on a cautious, inflation outlook-oriented, meeting-by-meeting approach,” Karahan added.
The outcome of Thursday’s MPC meeting is poised to shape market sentiment and reinforce the CBRT’s roadmap for balancing monetary policy and inflation control in 2024.
Bd-pratidin English/ Jisan
