BofA: Central Bank to cut rates in December, economist survey bets on January 2025

The Central Bank’s (CBRT) decision regarding the policy rate will be announced Thursday. While markets expect the interest rate to remain constant, attention will be paid to the messages regarding December. CBRT’s post-MPC statement ought to give some signals regarding the timing of the first rate cut, to prepare the markets, or to ensure against excessive optimism. Bank of America economists stated that there is room to reduce policy rates in December. A BloombergHT survey of 25 participants revealed a majority predicts the easing cycles to commence in January 2025.

 

Economists led by Zümrüt İmamoğlu from Bank of America commented regarding the December decision of the CBT. The report noted that there is room for the bank to cut policy rates in December, but there is no urgency to do so given low unemployment levels and potential upward surprises in inflation.

‘200-250 basis points possible’

In BofA’s base-case scenario, it was stated that if November inflation remains below 2 percent and data show a softening in service prices, a 200 to 250 basis point reduction is possible in December.

Minimum wage impact

BofA said that if there is an interest rate cut in December, there is a possibility that the CBRT will pass in January, especially if the minimum wage increase is higher than expected. Several investment banks commented that a minimum wage hike of 25% in consistent with CBRT’ end-2025 target CPI of 21%.

BloombergHT rate survey

 

The median expectation of 25 institutions participating in the Bloomberg HT interest rate survey is that no change will be made at the CBRT meeting in November with the policy rate remaining at 50 percent. In the survey, the forecast for the policy rate at the end of 2024 increased compared to the previous survey period and reached 50 percent. In the previous survey period, participants expected the policy rate to be at 47.5 percent at the end of the year.

In the 2024 year-end survey, the highest expectation was 50 percent and the lowest expectation was 47.5 percent.

Survey participants also shared their 2025 year-end forecasts and first reduction expectations in interest rates. The median forecast of 24 institutions expects the policy rate to decrease to 30 percent by the end of 2025. The highest expectation was 35 percent, the lowest expectation was 25 percent.

The first cut is expected in January
On the other hand, 9 out of 25 institutions that shared their forecasts expect the first reduction from the Central Bank in December. While the forecast of 12 institutions points to January, 3 institutions expect the first move in February, while one institution predicts the first move in March.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.