MNI CBRT WATCH: 100-150Bps Cut Seen After Nov Inflation Beat

The Central Bank of the Republic of Turkey is expected to cut rates by at least 100 basis points on Thursday, with policymakers likely to remain cautious despite November's monthly inflation surprising to the downside.

The CBRT was already expected to cut the one-week repo rate, currently at 39.5%, in December, before CPI inflation of 31.1% (0.87% MoM)  led analysts to revise cut expectations upwards, in some cases as high as 200bps. (See MNI EM INTERVIEW: More CBRT Cuts Boost De-anchoring Risk - Cangoz)

However, while governor Fatih Karahan has delivered larger-than-expected cuts in the past -- as in September’s 250bps move -- there is a recognition that inflation will end the year above the central bank’s 24% target rate, with 2026’s 16% goal also in question.

CAUTION

Caution seems likely to win out, with 100-150bps the expected landing zone ahead of January increases in state pay and pensions, and an expected slowdown in the pace of disinflation next year. 

A two percentage points cut, while not impossible, would represent a dovish surprise and reduce room for manoeuvre next year -- yet would still allow the CBRT to maintain its stance on the need for positive real rates and supportive fiscal policy. (See MNI EM INTERVIEW: CBRT To Focus On Real Rate Stability - Demiralp)