MNI CBRT Preview - July 2025: Restarting the Easing Cycle

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Executive summary:

• Adjustments to the CBRT’s policy statement in June indicated that policy easing will resume from July onward – which is the prevailing view shared among sell-side analysts.
• The median surveyed estimate looks for a 250bp cut to the one-week repo rate to 43.50%, although there are some calls for an even bolder move.
• Softer-than-expected headline CPI in June is supportive of renewed easing, however, ongoing political uncertainty and recent tweaks to tax rates on TRY deposits should prompt the CBRT to approach its cutting cycle with caution.

Officials have previously stressed that monetary policy can be restrictive even if rate cuts are being delivered, and this logic is likely to be repeated given that the one-week repo rate is currently over 10ppts above headline inflation. Year-on-year inflation fell to its lowest level since 2021 in June, with the +35.05% Y/Y print a touch below expectations. The downside surprise stemmed primarily from food prices and favourable base effects, though services inflation increased by a strong 2.7% M/M. Meanwhile, the CBRT assessed that “all indicators of underlying inflation decreased in May compared to the previous month.”