Will the Central Bank cut interest rates? Critical comments ahead of the June meeting

Nicholas Farr from Capital Economics stated that it is possible for the Central Bank of the Republic of Turkey (TCMB) to cut interest rates this month. Farr expressed that the decline in inflation in May could help the Central Bank gain more confidence in reducing borrowing costs. Farr pointed out that the interest rate cut process, which was previously expected to begin in the third quarter, could also take place this month.

Data revealed that annual inflation declined further in May. This situation could create an opportunity to cut the policy rate. However, ING announced that it does not expect a change in interest rates at the Monetary Policy Committee meeting to be held on June 19. The institution stated that the base effect and price declines support the improvement in annual inflation.

MORGAN STANLEY'S VIEWS

Evaluating the May data from TUIK, Morgan Stanley stated that the slowdown in service prices and the limited impact of the exchange rate contributed to the improvement in inflation. The institution stated that they do not expect a direct interest rate cut in June, but they anticipate that the average funding cost will normalize at the level of the one-week repo rate.

Morgan Stanley also expressed an expectation of easing in TL liquidity, stating that this could be achieved even without a Monetary Policy Committee decision. However, it added that the Central Bank might wait for June 19 to manage expectations regarding the interest rate decision. The institution predicts that the policy rate will be gradually reduced with an interest rate cut in July and that inflation will fall below 30 percent by the end of the year.

News Source: 12punto