Foreign banks evaluate the CBRT's potential interest rate decision: Will rates remain unchanged?

The CBRT Monetary Policy Committee will meet under the chairmanship of Central Bank Governor Fatih Karahan on Thursday, March 21. The interest rate decision will be announced at 14:00 on the same day.

In its February meeting, the Committee had skipped an interest rate hike and kept rates steady at the 45 percent level.

So, what decisions will emerge from the MPC? Here is the interest rate assessment from foreign banks...

DEUTSCHE BANK 

Revising their policy rate forecast due to the deterioration in inflation dynamics in Turkey, Deutsche Bank analysts stated that a 500 basis point rate hike at the CBRT's March meeting is 'highly likely' and that the interest rate could rise from 45 percent to 50 percent.

BANK OF AMERICA

Bank of America (BofA) economists Zumrut İmamoğlu, David Hauner, and Claudio Irigoyen wrote a note titled "Turkey trip notes: The hiking cycle may be over, but tightening continues" following their visit to Turkey last week.

In a recent note, BofA economists stated, "We see a 300-500 basis point hike in April as possible, but this is not yet our base scenario, and we believe it will depend on March inflation."

MORGAN STANLEY

The US bank Morgan Stanley announced that it has removed the expectation of interest rate cuts from the CBRT in November and December from its base scenario, and that it now expects the first rate cut from the CBRT in the first quarter of 2025.

In a note written by economist Hande Küçük, it was reported that the base scenario was changed following the inflation data for February, which came in higher than expected.

The statement included the following: "The widespread acceleration in inflation poses an upside risk to the Central Bank's inflation projections. This could lead to an increase in the policy rate in the second quarter of 2024, depending on data and other policy measures."

Küçük also referred to the remarks made by CBRT Governor Fatih Karahan at the inflation report meeting, stating that the CBRT would want to see the March inflation data before any additional interest rate hikes.

JPMORGAN

JPMorgan also estimated that the CBRT would raise the policy rate by another 500 basis points to 50 percent in April. The US bank had previously predicted that the CBRT would end its rate-hiking cycle with the hike that brought the policy rate to 45 percent. In a research note, JPMorgan stated, "Headline inflation in February came in at 4.5 percent monthly, well above our expectation of 4.2 percent and the market expectation of 3.8 percent." JPMorgan maintained its year-end policy rate forecast at 45 percent. Bank analysts indicated that the CBRT could cut rates in November and December.