MNI POLICY: Turkey CenBank Sees Valid Case For March Cut

The Central Bank of the Republic of Turkey is likely to strongly consider easing monetary policy again in March despite January’s higher-than-expected inflation, as it places greater weight on the medium-term outlook for prices than on the latest data alone, MNI understands.

January’s inflation of 30.65% prompted speculation of a rate hold in March, but a cut should be very much on the table given what is regarded as substantial and continued progress in the disinflation process.

So long as the composition of inflation continues to improve and expectations remain anchored, the baseline scenario will be seen as consistent with a cut. The CBRT has lowered the one-week repo rate to 37%, from a peak of 50% in March 2024.

The CBRT’s monetary policy stance is data dependent but not mechanical, and it would need to observe a significant deviation from the current trend for a pause in the easing cycle to be warranted.

The CBRT’s monetary policy framework focuses on achieving a sustainable return to inflation targets. As disinflation continues, inflation expectations and forward-looking inflation dynamics are likely to carry greater weight in rate decisions going forward.

On Thursday, the CBRT raised its inflation forecast for 2026 from 13-19% to 15-21%, but left interim targets for this year and next unchanged at 16% and 9%. (See MNI: CBRT Hikes Inflation Projection, Holds Interim Targets)