HSBC's year-end dollar and euro forecast: When will the CBRT start cutting interest rates?

British banking giant HSBC has shared its forecasts regarding the Central Bank of the Republic of Türkiye's interest rate decisions, as well as the dollar/TL and euro/TL exchange rates.

WHEN WILL THE CBRT CUT INTEREST RATES?

The major bank projected that the CBRT will make its first interest rate cut in the first quarter of 2025. Estimating that the interest rate will be 50 percent at the end of 2024, HSBC announced that it expects the rate to be 45 percent in the first quarter of 2025 and 40 percent in the second quarter.

In its report, HSBC noted that the Turkish Lira is showing a positive trend. It was stated that the Central Bank has not deviated from its hawkish stance, and it was emphasized that the bank's communication and actions do not signal a change in its policy approach for the remainder of the year.

The major bank underlined that the Central Bank's focus is on reducing excess TL liquidity, which is key to maintaining a sufficient level of monetary policy tightness to ensure the continuity of the decline in inflation and de-dollarization.

DOLLAR AND EURO FORECAST

Stating, "Therefore, while we are aware that a real exchange rate appreciation would require a higher movement in USD-TRY, we remain constructive on the TL in the medium term," the bank announced its year-end forecast for the dollar/TL exchange rate as 36 TL, which is only 3 TL higher than the current level. For the euro/TL exchange rate, it projected 37.8 TL.