CBRT May Cut Interest Rates

CBRT may cut interest rates. Economists are predicting monetary easing in the coming months.

The Central Bank of the Republic of Turkey (CBRT) Monetary Policy Committee kept the policy rate unchanged at 19 percent, in line with market expectations. While "high levels of inflation and inflation expectations" is indicated as the reason for the decision in the CBRT's decision text, following expressions have been made: "The current tight stance in monetary policy will be maintained decisively until a significant decrease in the forecast path of the April Inflation Report is achieved." Capital Economics Emerging Markets Chief Economist William Jackson, in his assessment to the AA correspondent on the subject, stated that the CBRT may ease in the third quarter. Pointing out that the statement of the CBRT, "The current tight stance in monetary policy will be maintained with determination until a significant decrease in the forecast path of the April Inflation Report is achieved" was repeated, Jackson said, "A rate cut was not likely today when the TL was under pressure." Reminding that the policy rate is 19 percent and the annual inflation rate is 16.59 percent, Jackson stated that the policy rate is above inflation and there is an open door for monetary relaxation to the CBRT. Phoenix Kalen, Emerging Markets Strategy Director at Societe Generale, said that the CBRT's decision was in line with expectations. Stating that the CPI may decrease to 15-16 percent at the end of 2021, Kalen reminded that the CBRT Chairman Central Bank Chairman Şahap Kavcıoğlu promised that the policy rate will continue to be established at a level that is realized and above the expected inflation. Kalen shared his estimation that the Central Bank could cut the policy rate by 100 basis points in the fourth quarter.