Global markets fluctuate with Fed's interest rate signals: All eyes on the CBRT

In global markets, although the US Federal Reserve (Fed) cut its policy rate by 25 basis points, the signals it gave that the easing cycle might slow down in 2025 created uncertainty in investor sentiment. While a negative trend was observed in US, European, and Asian stock markets, the interest rate decision to be announced by the Central Bank of the Republic of Turkey (CBRT) is awaited with curiosity domestically.

INTEREST RATE CUT HAD COME FROM THE FED

The Fed cut its policy rate by 25 basis points in line with expectations, bringing it to the 4.25-4.50 percent range. This step was the third interest rate cut the Fed has made during the year. However, projections regarding the federal funds rate indicated that the bank would slow down interest rate cuts in 2025. Fed Chair Jerome Powell emphasized that future interest rate cuts would be evaluated with a more cautious approach, while stating that it could take another 1-2 years to reach the 2 percent inflation target.

Volatility increased in the markets following Powell's statements. The ounce price of gold fell by 0.95 percent to 2,623 dollars, while the yield on the US 10-year Treasury bond rose to 4.53 percent. The dollar index, after seeing its highest level in the last two years at 108.5, finished the week at the 107.6 level.

DEVELOPMENTS IN EUROPEAN AND ASIAN MARKETS

In Europe, the Bank of England (BoE) kept interest rates unchanged, while it was noted that inflation remained above expectations. On a weekly basis, losses were experienced in the UK, French, Italian, and German stock markets.

In Asia, the Bank of Japan (BoJ) and the People's Bank of China (PBoC) did not change interest rates. However, the Fed's signals and the uncertainty created by US President Donald Trump's policies toward China negatively affected Asian markets. On a weekly basis, the Nikkei 225 index in Japan lost 1.95 percent, and the Kospi in South Korea lost 3.62 percent.

EXPECTATION FOR THE CBRT'S INTEREST RATE DECISION

In Borsa Istanbul, the BIST 100 index closed last week with a 3.96 percent loss at 9,724.50 points. The dollar/TL exchange rate rose by 0.8 percent to the 35.2269 level.

Domestically, investors have focused on the interest rate decision that the Central Bank of the Republic of Turkey will announce on Thursday. According to the AA Finance expectation survey, economists predict that the policy rate will be cut by 150 basis points to 48.50 percent.

Economists state the year-end 2025 policy rate expectation as 29.50 percent. Analysts state that the 9,700 and 9,650 levels are support, and the 9,800 and 10,000 points are resistance levels for the BIST 100 index.

WHAT IS EXPECTED IN THE MARKETS NEXT WEEK?

In the US, data on building permits, durable goods orders, and weekly jobless claims; in Europe, the UK's growth data and market closures due to the Christmas holiday will be monitored. In Asia, economic data from Japan and China will be followed.

Domestically, the financial services confidence index, the real sector confidence index, the capacity utilization rate, and the CBRT's interest rate decision will be the prominent agenda items of the week.

News Source: 12punto