Striking Central Bank interest rate decision forecast from Goldman Sachs

Contrary to the general market expectation, Goldman Sachs has projected that the Central Bank of the Republic of Turkey (CBRT) will keep its policy rate at 50 percent at its December meeting. The bank stated that a possible interest rate cut by the CBRT in December would be premature.

While the general expectation in the market is for the CBRT to cut the policy rate by 150 basis points at its December meeting, a different forecast has come from Goldman Sachs economists.

In a report dated December 20, signed by bank economists Clemens Grafe and Başak Edizgil, it was predicted that the CBRT would leave the policy rate unchanged at the 50 percent level at the December meeting.

Goldman Sachs economists pointed out that a possible interest rate cut in December could be premature. Stating in the report that their forecasts are based on normative analyses, the economists noted that the CBRT's main objective continues to be focused on building credibility while determining monetary policy.

Goldman Sachs stated that the upcoming meeting could be compared to the meeting in March, two weeks before the local elections, when the policy rate was raised and the CBRT increased its credibility regarding its commitment to price stability.

Pointing out that there have been upside surprises in inflation in the last quarter according to both the CBRT's and their own projections, Goldman Sachs economists stated that seasonally adjusted indicators suggest that disinflation stalled in the second quarter.