Economists' take on the Central Bank's interest rate decision: 'By the end of 2024...'

The Central Bank of the Republic of Türkiye (TCMB) announced that it has kept the policy rate steady at 50 percent following the Monetary Policy Committee (PPK) meeting.

Following the decision, AA Finans analyst and economist Haluk Bürümcekçi emphasized in his assessment that the projections in the inflation report and the inflation forecasts in the Survey of Market Participants continue to remain far apart.

HIGHLIGHTED THE COMING PERIOD

Bürümcekçi stated, "In the coming period and in terms of whether these forecasts will undergo changes in the Inflation Report to be published at the beginning of May, developments in the monthly inflation trend and the course of future inflation expectations will continue to be important." he said.

Stating that additional tightening in financial conditions and monetary policy is expected to contribute to the disinflation path, Bürümcekçi said that this trend could strengthen if additional tightening is also seen in fiscal policy.

Bürümcekçi, "In this direction, while we do not expect an increase in the policy rate in May, we believe it will be maintained at the 50 percent level for a long time. The duration of this period will depend on developments in the inflation trend and the alignment of inflation expectations with the TCMB's scenario." he stated.

"IT WAS EXPECTED"

In Touch Capital Markets Senior FX Analyst Piotr Matys, "Following last month's surprise 500 basis point rate hike, it was widely expected that the TCMB would keep interest rates unchanged today." he said.

Stating that the CBRT also reiterated its determination to maintain a tight monetary policy for as long as necessary, Matys expressed that the Bank has regained much of its credibility by significantly increasing interest rates.

Matys emphasized that many market observers would likely agree that Turkish monetary policymakers, led by CBRT Governor Fatih Karahan, should not be in a hurry to start cutting interest rates.

Expressing that being very patient and making a good start to 2025 might be more appropriate, Matys "However, the monetary policy easing process could also begin at the end of 2024" he assessed.

HAWKISH STANCE

Societe Generale Central and Eastern Europe, Middle East, and Africa Strategist Marek Drimal, He noted that the CBRT kept the policy rate steady in line with market expectations.

Stating that there were no surprises in the CBRT's policy text, Drimal said the Bankconfirmed its "hawkish" stance.

Stating that although headline inflation is expected to peak in May, he believes the CBRT will not be forced to tighten policy further in the coming months, Drimal said, "The CBRT may keep the policy rate steady at 50 percent until the end of the year, and there could be a 500 basis point cut in the policy rate in the first quarter of 2025" he added.

Drimal stated, "We believe that the lira will strengthen against the dollar in the coming months due to the seasonal improvement in the current account, the impact of the CBRT's hawkish stance, and the effect of rising interest rates and foreign capital inflows."