CBRT cuts interest rates after 22 months: Interest rate expectations for 2025 have changed

Following the Central Bank of the Republic of Turkey's (CBRT) decision to cut interest rates after nearly two years and reduce the number of meetings, interest rate cut forecasts from foreign institutions have also shifted. Here are the latest forecasts regarding the Central Bank...

The Central Bank of the Republic of Turkey (CBRT) decided to cut interest rates for the first time in 22 months at the final Monetary Policy Committee (MPC) meeting of the year held yesterday.

The CBRT, which raised the policy rate by a total of 41.5 percentage points to 50 percent between June 2023 and March 2024, had kept this level constant for 8 meetings.

At the December meeting, the policy rate was lowered to 47.50 percent with a 250 basis point cut. Thus, the Central Bank has implemented an interest rate cut for the first time since February 2023.

Furthermore, a hawkish step was taken at yesterday's meeting by narrowing the interest rate corridor.

The MPC statement indicated that further interest rate cuts would be data-dependent.

Additionally, the Central Bank announced that it will hold 8 meetings in 2025 instead of 12.

According to the calendar published on the Central Bank's social media account, the MPC meetings will be held on the following dates:

January 23, March 6, April 17, June 19, July 24, September 11, October 23, December 11.

NEW CBRT FORECASTS FROM FOREIGN BANKS

Following all these developments, many analysts have predicted that the CBRT will make more and larger cuts next year.

Here are the new CBRT forecasts from foreign banks following yesterday's interest rate decision:

* Morgan Stanley economists, following Thursday's cut, project that interest rates will reach 42.5 percent by March, compared to their previous forecast of 44 percent, and that there will be two 250 basis point cuts in the first quarter.

* TEB economist Okan Ertem and Barclays economist Ercan Ergüzel estimate that a quarter-point cut will be made at all 8 meetings planned for next year and that interest rates will fall to 27.5 percent by the end of the year.

* Citigroup estimates that interest rates will be around 30 percent by the end of 2025 and warns that this policy could reduce the appetite for lira assets.

* Goldman Sachs, while maintaining its forecast that interest rates will be 39 percent by June, stated that risks such as the new policy meeting calendar are "small."