Dollar and inflation forecasts rise

The Central Bank of Turkey lowered interest rates by 300 basis points to 43 percent at its meeting yesterday. This decision was in line with market expectations of a cut between 250 and 350 basis points. This first interest rate cut following the fluctuations in March shows that the bank is maintaining its cautious stance. By maintaining the asymmetry in the interest rate corridor, flexibility was provided to increase the funding rate to 46 percent if necessary.

German banking giant Deutsche Bank made predictions regarding the Central Bank's future interest rate policy. While the bank maintains its year-end policy rate forecast at 36 percent, it expects 250 basis point cuts in September and October, and a 200 basis point cut in December.

American financial institution Morgan Stanley similarly projects a year-end interest rate of 36 percent. Expecting this level to be reached with 250 basis point cuts in the four remaining meetings before the July interest rate decision, Morgan Stanley economists foresee a 300 basis point cut in September, and 200 basis point cuts in October and December following the July decision.

Morgan Stanley economists Hande Küçük and Arnav Gupta raised their year-end inflation forecast from 29 percent to 30 percent, and their dollar/TL forecast from 43 to 45. This revision was based on the recent pace of depreciation of the Turkish Lira.

News Source: 12punto