Fatih Akçelik: We expect the CBRT to slow down tightening in November

Foreign institutions estimate that the Central Bank of the Republic of Turkey (CBRT) will make a more limited tightening decision at its November meeting compared to previous meetings.

The latest analysis came from JPMorgan. JPMorgan Turkey Economist Fatih Akçelik projected that the CBRT will raise the policy rate by 250 basis points to 37.50 percent at its November meeting. Akçelik also predicted a 250 basis point hike in the policy rate in December.

In a note sent to JPMorgan clients, Akçelik emphasized that the expectation of a rise in annual inflation and the negative current account balance outlook between November 2023 and May 2024 necessitate additional hikes. Akçelik also pointed out that the CBRT has appeared hawkish in its recent guidance. Akçelik stated that they estimate the CBRT will maintain the interest rate at 45 percent until the end of 2024.

In his report, Akçelik stated that their year-end 2023 inflation expectation is 65 percent. Predicting that inflation will peak at 73 percent in May 2024, Akçelik stated that their year-end 2024 inflation expectation is 40 percent.

Evaluating the effects of monetary tightening on the growth outlook, Akçelik projected that the tightening will pull growth below 3 percent in 2024.

Including expectations regarding the current account balance, Akçelik estimated that the ratio of the current account deficit to national income will be 4.6 percent in 2023, and that this ratio will decline to 2.9 percent in 2024.

SocGen and Morgan Stanley, which had previously shared their analyses, had also projected that the policy rate would be increased by 250 basis points at the November meeting. A survey conducted by Bloomberg HT with domestic institutions had also pointed to the same expectation.