Morgan Stanley has brought forward its forecast on when interest rate cuts will begin in Turkey.

Morgan Stanley has brought forward its interest rate cut expectations following the Central Bank of the Republic of Turkey's (CBRT) interest rate decision yesterday.

The report stated, "A softer tone and implicit guidance on real interest rates. It signals that the Central Bank is preparing to start interest rate cuts in line with the decline in actual and expected inflation." The report noted that the interest rate cut forecast has been moved from January to December, while the tight monetary stance still prevails.

FIRST SIGNALS OF INTEREST RATE CUTS HAVE ARRIVED

In the Monetary Policy Committee (MPC) statement announcing the Central Bank's interest rate decision yesterday, there were signals indicating that the bank is opening the door for an interest rate cut in December.

Morgan Stanley predicted that headline inflation would decline to 1.9% month-on-month and 46.5% year-on-year in November, and to 1.5% month-on-month and 44.5% year-on-year in December. This situation is expected to create room for a 200 basis point interest rate cut in December and keep the real interest rate in positive territory. In a statement from Morgan Stanley, it was noted, "If the slowdown in inflation halts, interest rate cuts may be paused, or the Central Bank may continue with smaller steps."

CITIGROUP SHARES THE SAME VIEW

In a report published by Citigroup economists İlker Domaç and Gültekin Işıklar, it was emphasized that the CBRT is laying the groundwork for an interest rate cut. The report indicated that the CBRT's assessment of supporting the disinflation process of domestic demand and signs of improvement in service inflation, combined with an increase in coordination between fiscal and monetary policy, suggests that the interest rate cut remains on the table for December.