A report prepared by Morgan Stanley economists Georgi Deyanov and Arnav Gupta forecasts that the Central Bank of the Republic of Türkiye (CBRT) will leave its policy rate unchanged at 37% at the Monetary Policy Committee (MPC) meeting scheduled for Thursday.
According to the report, the Central Bank is expected to begin a cautious easing cycle as the disinflation process regains momentum in the fourth quarter of the year. Morgan Stanley forecasts a total of 200 basis points in rate cuts by year-end, bringing the policy rate down to 35%.
October and December in focus for rate cuts
Morgan Stanley analysts said the expected improvement in the underlying inflation trend in the final quarter would provide the CBRT with room to cut interest rates.
According to the forecast, the first rate cut is expected in October, followed by a second cut in December. The policy rate is expected to be reduced by 100 basis points at each of the two meetings.
The report also forecasts that rate cuts will continue gradually throughout 2027. Morgan Stanley expects the policy rate to decline to as low as 27.50% by the end of 2027, while noting that upside risks to this forecast remain due to persistent inflationary pressures.
Positive carry trade outlook for the Turkish lira
Morgan Stanley believes that Türkiye’s monetary policy framework remains resilient despite challenging global and regional conditions. The bank also maintains a positive view on carry trade strategies involving the Turkish lira.
Strategists said they continue to favor short USD/TRY positions over a three-month horizon.
The report noted that persistently high inflation warrants a cautious stance toward the local bond market, while the Turkish lira’s depreciation remaining below levels priced into the forward market could offer investors attractive carry returns.
Comments
No comment yet.