Morgan Stanley expects another 250bps cut this month

ISTANBUL

The Turkish Central Bank is on track to deliver another 250 basis points rate cut when its Monetary Policy Committee meets this month, according to Morgan Stanley.

The Central Bank started the easing cycle in December by lowering its policy rate from 50 percent to 47.5 percent in a move that marked the first cut in nearly two years.

“The better than-expected December print and a decomposition showing a significant improvement in sticky services [including rent] will likely give the Central Bank the confidence to continue with another 250bp rate cut on Jan. 23,” said Hande Küçük, an economist at Morgan Stanley, in a report.

Türkiye's annual inflation rate slowed for the seventh consecutive month in December.

Consumer prices rose by 44.38 percent last month, down from 47.1 percent in November.

“While the minimum wage hike of 30 percent was at the lower end of market expectations, and lira strength continues, both us and the Central Bank expect monthly inflation to rise in January-February as new year wage adjustments and administered price hikes show their impact,” the report said.

Morgan Stanley expects headline inflation to continue declining toward 3.8 percent by March.

“This, along with a continued tight monetary stance, should keep the second-round effects of new year wage and price hikes limited, allowing the Central Bank to continue adjusting real rates in line with the decline in realized and expected inflation, in our view,” it said.

Morgan Stanley kept its forecasts for 26 percent inflation and a 28.5 percent policy rate at the end of 2025.