Forecast from Deutsche Bank! Will the CBRT keep interest rates steady in April?

Domestic and foreign market participants do not expect any interest rate changes at the Central Bank of the Republic of Turkey (CBRT) meeting in April.

According to a report prepared by Deutsche Bank analysts Yiğit Onay and Christian Wietoska, it is projected that the CBRT will keep the policy rate steady at 50% at the April meeting.

According to Bloomberg, it was stated that the CBRT, which unexpectedly raised rates by 500 basis points at the March meeting, will likely shift to a wait-and-see approach to evaluate the resilience of domestic demand, high levels in inflation indicators, and the effects on unanchored inflation expectations. Deutsche Bank had stated that the improvement in the perception of local assets following the local elections and the significant improvement in the CBRT's net reserve position supported this view.

The report stated that officials would focus on tightening the fiscal stance and income policy to complement monetary policy efforts aimed at limiting consumption demand and reducing inflation.

Deutsche Bank acknowledges that the current policy rate level is the peak of the interest rate hike cycle and that additional increases could be possible in the second quarter if inflationary risks persist. The bank predicted that the CBRT would be patient before starting a cutting cycle due to persistent long-term inflationary pressures, fragile expectations, and high dollarization.

It stated that the CBRT would maintain the current policy rate level until the fourth quarter of the year and set its interest rate forecast for the end of 2024 at 45%.

In Deutsche Bank's report, regarding the policy path, it was stated that there is a tendency toward starting the easing cycle later, and that factors such as geopolitical developments in the Middle East, volatility in oil prices, and the decreasing probability of the Fed cutting interest rates in 2024 could extend the CBRT's waiting period.