Turkey Cuts Interest Rates Again, Drops Monthly Inflation Gauge
Turkey's central bank has lowered its one-week repo rate for the second consecutive time, this time by 250 basis points to 45%. The Monetary Policy Committee (MPC) also removed monthly inflation from its policy guidance, citing the need to focus on the "disinflation path" and underlying inflation trend.
The MPC statement noted that the policy rate will be determined to maintain the necessary tightness in line with projected disinflation, realized and expected inflation, and the underlying trend. The central bank also signaled additional measures to manage excess liquidity.
Prior to the decision, most economists had forecast a 250 basis point reduction. The MPC's move is seen as supporting economic growth while attempting to keep inflation expectations in check.
Morgan Stanley economist Hande Kucuk projects annual inflation in January to reach 41.4%, driven by rent, services, and wage increases. Governor Fatih Karahan is expected to provide fresh inflation projections on February 7.
Analysts had previously anticipated 250 basis point cuts at each MPC meeting this year. However, factors such as U.S. Federal Reserve decisions, U.S. trade policy, and fiscal consolidation by Turkey could influence these expectations.
Some investors prefer a slower easing cycle to allow high real rates to curb inflation. However, Governor Karahan has indicated a preference for regular cuts with no pauses in the near term.