The Central Bank of the Republic of Turkey (CBRT) is expected to forge ahead this week with another rate cut of either 50 or 100 basis points, according to surveys.
If delivered, it will follow an unexpected cut from last month, when the central bank lowered its benchmark policy rate – the one-week repo rate – to 18% from 19%.
Ten of 21 economists polled by Reuters expect the bank to deliver a cut by 50 points to 17.50% on Thursday, while another 10 foresee a 100-point cut to 17%.
One predicted no change, while at least three contributors declined to respond, citing difficulties guessing the central bank’s moves.
The median in the Anadolu Agency (AA) survey of 26 economists stands at a cut of 50 basis points. Six economists expected no change, while eight predicted the rate to fall by 50 basis points, one by 75 basis points, and 11 by 100 basis points.
According to the median estimate in a Bloomberg survey of 15 analysts, the Monetary Policy Committee (MPC) is expected to deliver a cut of 100 basis points.
The MPC meeting comes a week after Turkey dismissed two of its central bank deputy governors and another high-level official.
Suggestions that some of the three policymakers opposed last month’s rate cut were dismissed by CBRT Governor Şahap Kavcıoğlu, who said Friday that they left either of their own choice or because the bank wanted it.
Speaking to reporters outside the central bank after meeting main opposition Republican People's Party (CHP) leader Kemal Kılıçdaroğlu, Kavcıoğlu said people were making wrong assumptions about the removal of the MPC members and that there were no problems at the central bank.
The policymakers “were there when the rate was cut and there when it was raised” over the years, the governor said. It would not be right to “seek for something” behind the dismissals, he added.
Last month’s cut was seen as premature by some, given it left real yields in negative territory, as inflation rose to 19.58% in September. The core “C” measure – which the central bank has been stressing lately – rose to near 17%.
Kavcıoğlu said the bank would consider domestic and international developments before making a rate decision at this week’s MPC meeting and would make “the most correct decision.”
“We will work with the technical team until Oct. 21 and make a decision by analyzing the data and developments,” he noted. “No one should doubt that the central bank will make the right decision.”
He also said the rate cut did not on its own cause the Turkish lira depreciation, citing recent dollar strength.
The median estimate of 13 economists who participated in the Reuters poll for the policy rate at year-end stood at 16.5%, with forecasts ranging between 17% and 16%.
The median in the AA survey for the year-end policy rate stands at 17%.
The central bank forecast inflation would hit 14.1% by the end of the year.
The country’s medium-term economic program, announced last month, expects it to fall to 16.2% by the end of the year and hit 9.8% by the end of 2022.