The Turkish central bank resumed its easing cycle last month after an eight-month break, cutting rates by 100 basis points to 36% as it cited recent data and indicators confirming "the deceleration in the underlying trend of inflation."
However, with the latest inflation reading on Tuesday and a slight increase in the annual reading as well as a stronger-than-expected monthly rise in prices of 2.58%, analysts and financial institutions are split in their expectations ahead of the bank's December meeting.
Monthly inflation in October came in at 2.58%, above market consensus and our 2.4% call, driven by unprocessed food, energy, and clothing, researchers at Dutch banking giant ING said in a note.
They cited that downward trend stalls but still pointed out that the Central Bank of the Republic of Türkiye (CBRT) is "likely to continue its rate-cutting process in December as well."
"In our view, October inflation is unlikely to be a game changer here," they said.
They also noted that they continue to expect that annual inflation is likely to remain below 30% at the end of this year.
Official data shared on Tuesday by the Turkish Statistical Institute (TurkStat) showed that annual inflation ticked up to 29.77% in October, after 29.73% in September, when inflation dropped below 30% for the first time in nearly five years.
"Uncertainty surrounding oil prices – along with their spillover effects on other commodity prices – continues to pose risks to the inflation outlook in the near term," ING said.
On the other hand, BBVA Research, citing the high energy prices and recent pressures on reserves, said it expects the CBRT to keep interest rates unchanged at its Monetary Policy Committee (MPC) meeting on Dec. 10.
It also said it has maintained its year-end 2026 inflation forecast for Türkiye at 30%.
Also, according to institutions polled by publication Matriks Haber, it said that Goldman Sachs also does not foresee an interest rate cut as it cited an acceleration in seasonally adjusted inflation and a decline in reserves.
Akbank, similarly, maintains its year-end policy rate forecast at 36% and does not expect a cut in December.
In the assessments of various institutions, the CBRT’s quarterly inflation report due for release on Nov. 12, along with November inflation data, energy prices, and developments in reserves, stand out as the primary factors that would shape the interest rate decision in December.
The general outlook suggests that, despite October inflation exceeding expectations, improvements in service prices and core indicators may create room for measured interest rate cuts.
However, cost pressures stemming from energy sources could continue to limit the scope for monetary policy action.
