MNI INTERVIEW: Flat CPI Puts CBRT Nearer Hike Trigger Point

Sticky inflation means Turkey's central bank is nearing the "trigger point" when it may have to pause or partially reverse its easing cycle, the director of Ankara’s Centre for Studies on Fiscal and Monetary Policy told MNI, though he added that growth concerns mean it will likely cut by 100 basis points to 39.5% next week.

"We are closer to the tightening trigger than a month ago. Another month of elevated prints would likely force at least a pause, potentially accompanied by macro-prudential measures—depending on the magnitude of the deviation from the interim path," M. Coskun Cangoz said in an interview.

The CBRT said in August that it expects prices to rise by 25-29% this year - an increase on the previous projection of 19% to 29% and implying a mid-point of 27%. But inflation of more than 33% in each of the last two months will have caused policymakers' midpoint for this year to shift up “modestly - by around half a percentage point," Cangoz said.

That would put the mid-point closer to the 28.5% average for 2025 seen in the government's Medium Term Program report published last month, though Cangoz said he did not expect the CBRT to re-centre its band formally.

"My initial year-end inflation forecast was slightly above 30%, and I keep it unchanged. This reflects the recent inflation surprises, last month’s rate cut, and the likelihood of another—albeit smaller—cut this month." (See MNI EM INTERVIEW: CBRT Slowdown Needs Better Signalling - Cangoz)

SMALLER STEP

Recent annual and monthly inflation readings point to stickier momentum, which, coupled with the central bank’s own guidance that policy will be tightened if the outlook diverges from interim targets, argues either for pause in easing or “at a minimum” a smaller step with hawkish language, Cangoz said.

“I expect a smaller cut (100 bps), with an emphasis on anchoring medium-term inflation expectations. A smaller step also supports their “meeting-by-meeting” communication framework.”

For 2026, the 13–19% range seen by the CBRT is likely to be maintained in November's Inflation Report, with inertia and import-price dynamics highlighted as key upside risks, Cangoz said.

Yet the CBRT remains under pressure to retain the greater credibility it has gained under the current leadership, he said.

“Credibility has improved markedly over the last two years, but it remains conditional on delivering disinflation consistent with interim targets. In that sense, this meeting is a test: a modest move (or a pause) plus hawkish guidance would reinforce the data-dependent narrative; an overly large cut would risk adverse re-pricing of expectations.” (See MNI EM INTERVIEW: CBRT To Cut 100Bps With Credibility In Focus)