After the interest rate was kept stable in November, expectations for a reduction shifted to December.

The Central Bank announced its interest rate decision for October. The decision came in line with expectations. The Monetary Policy Committee of the Central Bank of the Republic of Turkey kept the policy rate, the one-week repo auction interest rate, unchanged at 50% for the seventh consecutive time.

WHAT IS THE YEAR-END INTEREST RATE EXPECTATION?

The average year-end policy interest rate expectation of economists was calculated to be 49.10%. Among the economists sharing their expectations for the year-end, 6 predicted that the policy interest rate would be 50%, 1 predicted it would be 48.5%, and 3 predicted it would be 47.5%.

DECEMBER'S OUTLOOK IS CLEAR FROM NOVEMBER

The interest rate decision to be made in December can also be inferred from the lines of the bank's October report. Accordingly, the following was stated in the decision text of the Monetary Policy Committee:

"In October, a decline was observed in the main trend of inflation. Indicators for the last quarter imply that domestic demand continues to slow down, supporting the decline in inflation to sustainable levels. While core goods inflation remains low, signs of improvement in service inflation have become more pronounced. Due to temporary supply conditions, unprocessed food inflation continues to remain high. Although inflation expectations and pricing behaviors show a tendency to improve, they continue to pose a risk factor in terms of the disinflation process.

"THE INCREASING COORDINATION OF FISCAL POLICY WILL ALSO MAKE A SIGNIFICANT CONTRIBUTION TO THIS PROCESS"

The decisive stance in monetary policy will reduce the main trend of monthly inflation through balancing domestic demand, real appreciation of the Turkish Lira, and improvement in inflation expectations, thereby strengthening the disinflation process. The increasing coordination of fiscal policy will also make a significant contribution to this process. The tight monetary policy stance will be maintained until a clear and permanent decline is achieved in the main trend of monthly inflation and inflation expectations converge to the projected forecast range. In this regard, the level of the policy interest rate will be determined in a way that provides the tightness required by the projected disinflation process, taking into account inflation realizations and expectations. The Committee has reiterated its cautious stance against the upward risks to inflation. In the event of a significant and permanent deterioration in inflation, monetary policy tools will be used effectively.

"STERILIZATION TOOLS WILL CONTINUE TO BE USED EFFECTIVELY"

In the event of developments in the credit and deposit markets that are outside expectations, the monetary transmission mechanism will be supported by additional macroprudential steps. Liquidity conditions are being closely monitored in light of possible developments. Sterilization tools will continue to be used effectively.

The Committee will determine its policy decisions by considering the delayed effects of monetary tightening, in a way that will reduce the main trend of inflation and provide the monetary and financial conditions necessary to achieve the inflation target of 5% in the medium term.

Indicators related to inflation and its main trend will be closely monitored, and the Committee will use all the tools at its disposal decisively in line with its primary objective of price stability. The Committee will make its decisions within a predictable, data-driven, and transparent framework."

EXPECTATIONS OF ECONOMISTS REGARDING THE INTEREST RATE DECISION

All economists participating in the expectation survey conducted by AA Finance expected the TCMB to keep the policy interest rate unchanged at 50% in November. The average year-end policy interest rate expectation of economists was calculated to be 49.10%.

MORGAN STANLEY EXPECTS A 200 BASIS POINT CUT

Morgan Stanley has made a forecast for an interest rate cut in December. Stating that the TCMB has adopted a softer tone, Morgan Stanley has moved its previously announced expectation for January to December.

The American bank, which expects a 200 basis point cut next month, predicts that the policy interest rate could be reduced to 28.5% by December 2025.

DEUTSCHE BANK: INTEREST RATE CUTS MAY BEGIN

Deutsche Bank announced that the Monetary Policy Committee has signaled a shift towards a dovish stance. The bank indicated that possible interest rate cuts may begin as early as December.

In the bank's statement, it was noted, "Although the TCMB has not clearly signaled an interest rate cut in December, we believe that the likelihood of starting interest rate cuts in December is relatively high."

GOLDMAN'S JANUARY EXPECTATION

Goldman Sachs has not changed its expectation for the first interest rate cut from the TCMB. The bank stated that it expects a small cut of 100 basis points in January, anticipating a change in guidance.

Goldman expects the TCMB to consider the impact of the minimum wage on inflation.

UBS HAS NOT CHANGED ITS FORECAST

UBS stated that the Central Bank may consider a 250 basis point easing in December, bringing the policy interest rate down to 47.5%. The bank maintained its forecast for the first interest rate cut as January.

In the analysis, it was stated, "In our view, the changes in the MPC statement do not necessarily mean that an interest rate cut will occur in December, but it is likely that a path in that direction is being followed."