MNI CBRT Preview - March 2025: Keeping Pace For Now
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Executive summary:
- The CBRT is widely expected to deliver another 250bp reduction to the one-week repo rate following identical moves in December and January.
- While the January inflation data surprised to the upside, the February CPI print came in below expectations, offsetting the surprise from the earlier figures and clearing the way for another 250bp cut.
- Almost all of the analyst views we have surveyed in this document expect a 250bp cut to the repo rate, taking it to 42.50%, though the scale of policy easing is likely to moderate moving forward as the pace of disinflation slows.
Given the CBRT has shifted to 8 meetings per year from 12, we have had two sets of inflation data since the previous rate-setting meeting. The January figures surprised negatively against analyst consensus, with the headline figure crossing at +42% Y/Y from +44% in December, a more moderate fall compared to expectations of a sharper decline to +41%. However, the February figures have since offset that surprise, with the annual reading showing at a below-expectations +39% Y/Y.
Moving forward, the CBRT is expected to shift from its 250bp/meeting rate cut pace towards smaller cuts as the pace of disinflation slows. A former CBRT Deputy Governor told MNI that “until the end of June there is room for a minimum of 450 basis points and a maximum of 600 basis points of further interest rate cuts.” Similarly, a former senior Turkish government official said he expects “a relatively slow decline in inflation in the second half of the year”, with the policy rate likely to remain at around 40%.
