Goldman Sachs, UBS, Deutsche Bank and Citi shared their expectations after the CBRT’s interest rate decision.
After the meeting in which the CBRT decided not to change the interest rates, some institutions shared their new analyses, as reported by BloombergHT. While Goldman Sachs stated that it expected a 100 basis point discount in January, UBS and Deutsche Bank drew attention to the possibility of a discount in December. Citi recommended profit taking on TL positions.
Goldman Sachs
Goldman Sachs stated that the bank did not change interest rates as expected, but its guidance was more dovish. Analysts Başak Edizgil and Clemens Grafe drew attention to the paragraph in CBRT’s statement predicting inflation expectations have improved, adding “The bank’s assessments on inflation are in line with our forecasts. The change in verbal guidance is also not surprising.
We maintain our expectation of a small 100 basis point reduction in January. “Our year-end inflation forecast is 44 percent, as in the CBRT’s forecast. This means 1.5 percent monthly inflation in November and December, we think this is realistic.”
He further noted:
In the note, it was stated that the CBRT would want to see inflation come down to the forecast pace before starting reductions. It was stated that the bank will need to maintain its restrictive monetary policy stance in the coming quarters.
UBS
While strategist Gyorgy Kovacs pointed out the possibility of a cut in December, he did not change the base-case t scenario of the first in January. In the statement, “The bank’s new guidance shows that interest rate cuts may begin soon. The evaluation made after the MPC meeting seems more constructive regarding the inflation outlook. A rate cut in December is a possibility, but it does not seem certain.
Four critical topics, namely the November inflation figure, the new minimum wage, the inflation expectation survey and the 2025 budget, will be monitored closely. “If incoming data shows that inflation and inflation expectations have moderated, the Central Bank may consider reducing the policy rate by 250 basis points to 47.5 percent in December.”
Deutsche Bank
Economist Yiğit Önay and strategist Christian Wietoska stated that the bank did not change the interest rate after the inflation figure was higher than expected in the last 2 months, but sent dovish signals. The note stated that the door was opened for rate cuts in December.
In the report, it is stated that future inflation data and the course of the currency will be factors to be closely monitored and added: “We think that it is highly likely that the CBRT will start monetary easing in December. However, an upward surprise in inflation or pressure on the TL may postpone the discount to later months.”
Citi recommends cutting TL positions
The bank recommended profit taking by halving TL positions. In the note, it was reminded that the spot reference level for the short position in USD/TL opened on July 1 was 32.7, and it was stated that the total return in this transaction was 8.35 percent.
The bank will reduce the TL weight in its model portfolio, which was previously 2 percent, to 1 percent. In addition, the bank pointed out that the ‘overweight’ recommendation for TL is one of the basic elements in its position in emerging market currencies on a global level.
While the bank stated that it continues to believe that economic policies in Turkey are still in the right direction, it said that the possible monetary easing move in December may have a negative impact on foreign investor sentiment.
While it was stated in the bank’s note that the narrowing in Turkey’s current account deficit continues, more steps need to be taken to reach 2025 inflation target.
Regarding this issue, the note stated, “Fiscal policy still needs tighten to aid disinflation. In this context, there is more work to be done on the economic policy side in 2025.”
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