The Turkish central bank is set to convene for its first monetary policy committee (MPC) meeting this year on Thursday as markets look for its next move following the first rate cut in nearly two years earlier in December.
Several polls and independent economists expect the Central Bank of the Republic of Türkiye (CBRT) to likely opt for another 250 basis points (bps) cut this week after the bank slashed rates to 47.5% from 50% at the end of last month.
That marked the first easing since February 2023 amid a long tightening cycle between mid-2023 and March last year.
The economists polled by Anadolu Agency (AA) expect the CBRT to continue with the cuts, foreseeing a 250 bps reduction this week. All 17 economists in a poll shared the same expectation.
Similarly, all 25 institutions that participated in the survey by private broadcaster Bloomberg HT shared on Friday unanimously expect a 250 basis point interest rate cut from the CBRT this week.
Türkiye's annual inflation eased to 44.38% in December, closely in line with CBRT's final year-end projection, official data showed earlier this month. The inflation dropped from around 75.5% in May last year.
The median of economists' polled by AA for the 2025 year-end policy rate was 30%. This correlated with the expectations in the poll of Bloomberg HT, where economists also pointed to a policy rate level of 30%. In the previous survey, the estimate was at 31%.
The highest expectation in participants' interest rate estimates for the end of 2025 was 35%, and the lowest was 25%, it said.
The MPC meeting will take place against the backdrop of improving expectations related to the inflation outlook. A recent survey of market participants for January by CBRT showed that the 12-month ahead inflation expectations declined to 25.38% from 27.07%.
"It is very important that the improvement in expectations continues for rigidities to decrease," Treasury and Finance Minister Mehmet Şimşek said in a post on X on Friday, commenting on the results of the CBRT survey.
"We will support the fight against inflation with our demand-side policies as well as supply-side steps in areas such as food, housing and energy," he added.
Meanwhile, the CBRT Governor Fatih Karahan reiterated earlier this week the aim of bringing down inflation to 21% by the end of the year.
Stating that the decisive stance in monetary policy has reduced the underlying trend of monthly inflation and strengthened the disinflation process through rebalancing in domestic demand, real appreciation in the Turkish lira and improvement in inflation expectations, Karahan said that the increased coordination of fiscal policy will also contribute significantly to this process.
"With the measures taken in the first phase, we prevented inflation from rising to higher levels," AA quoted him as saying during the event in the central province of Eskişehir on Thursday.
Prior to this, Karahan also delivered a presentation on the inflation outlook to the investors in London, where he highlighted that inflation expectations are improving and that expectations of households "started to improve as well."
Karahan stated on Thursday that the tight monetary policy stance will be maintained until the underlying trend of monthly inflation and inflation expectations significantly and permanently declines and converges to the projected forecast range.
In this direction, he stated that the level of the policy rate will be determined in a way that ensures the tightness required by the envisaged disinflation process, taking into account inflation realizations and expectations.
"The committee will take its decisions with an inflation outlook-oriented, cautious and meeting-based approach," he added.
