MNI CBRT Review - Sep'25: Slower Easing, Tweaks to Statement

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Executive summary:

• The CBRT cut the one-week repo rate by 250bps to 40.50%, slightly above the median estimate of a smaller 200bp move.
• Guidance that future decision will be made prudently on a meeting-by-meeting basis was repeated.
• The Bank omitted reference to real TRY appreciation from its policy statement.

In its policy statement, the CBRT stated that “The step size will be reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook,” guidance which was identical to that in July. Food and services prices are both flagged as upside risks to the inflation outlook, although the statement notes that the underlying trend of inflation slowed down again in August.

The most notable tweak to the policy statement came with the omission of any reference to real TRY appreciation when discussing the channels through which tight monetary policy contributes to disinflation. Analysts note that this may signal a weakening of the CBRT’s implicit target of real currency appreciation and instead points to a prioritisation of its reserves accumulation strategy. Meanwhile, the Bank previously guided for the effective use of all monetary policy tools in the event of a deterioration in the inflation outlook (i.e. the use of macroprudential measures), but its guidance now indicates that the monetary policy stance will be tightened if inflation deviates from the interim targets. This could suggest a greater reliance on interest rates instead.