Bank of America CBRT Report: Interest Rate Cut and October Expectation

US-based investment bank Bank of America has published its latest report regarding the monetary policy and inflation outlook of the Central Bank of the Republic of Turkey. While no change is expected in September, an interest rate cut is foreseen in October.

October Pointed Out for Interest Rate Cut

According to the latest report prepared by Bank of America, no change in the policy rate is expected in September. The first interest rate cut move is projected to be implemented in October.

The report clearly states that with a likely 100 basis point cut in October, the policy rate will be pulled down to 36 percent.

Normalization Process in Liquidity Policy

In the assessment published under the signature of BofA economist Hande Küçük, attention was drawn to the Central Bank's liquidity moves and normalization steps in the market.

The resumption of one-week repo auctions, which were paused amid the environment of uncertainty caused by the US-Israel-Iran War, was interpreted as a strong signal of normalization.

September Expectations and Inflation

Due to high inflation expectations and the persistence of global geopolitical risks, it is estimated that the CBRT will skip the Monetary Policy Committee meeting in September.

With the base effect coming into play, inflation is expected to decline to the band of 30 to 30.5 percent in September.

Medium-Term Inflation and Growth Projections

While keeping its medium and long-term macroeconomic expectations for Turkey up to date, the institution maintained its end-2026 inflation forecast at 29.5 percent.

According to the bank's forecasts, by the end of 2027, the policy rate will have declined to 32 percent and inflation to the level of 26 percent.