The Central Bank of Turkey may lower the rate for the first time in almost 2 years

The central bank of Turkey is preparing on Thursday to announce the first discount rate cut in almost two years, but the scale of this step is causing controversy among analysts.

According to the median estimate of the expert survey, the rate is expected to decrease from 50% to 48.25%. JPMorgan and Deutsche Bank forecast a decrease of 150 basis points, while Citigroup and Bank of America expect a sharper decrease of 250 basis points. Forecasts vary due to the lack of clear signals from the central bank under the leadership of Fatih Karakhan.

Some officials advocate a cautious approach so as not to provoke negative reactions from investors. Bloomberg analysts believe that policy easing will continue with monthly rate cuts in 2025, bringing it to 25% by the end of the year. Macroprudential regulations are also expected to weaken, especially in the second half of the year.

According to Deutsche Bank analysts, the rate cut may be complemented by a narrowing of the rate range, which will signal a restrained policy for investors.

The central bank has already raised its inflation forecasts, with prices expected to rise by 44% by the end of 2024 and 21% by the end of 2025. In November, monthly inflation accelerated and consumer price growth slowed to 47.1%, which is still well above the official target of 5%.

The minimum wage in Turkey will be raised by 30% in 2025, which the markets have taken positively. Inflation data for December will be published on January 3.