Bank of America's CBRT Interest Rate and Inflation Expectations
Evaluating the CBRT's normalization steps, BofA forecasted that the interest rate will remain unchanged in September and a 100 basis point cut will be made in October.
Bank of America evaluated the Central Bank of the Republic of Turkey's return to weekly repo auctions as a normalization step. In the prepared report, it was predicted that interest rates would be kept constant in September and the first interest rate cut would take place in October with a 100 basis point reduction.
Normalization Step
Bank of America described the Central Bank of the Republic of Turkey's resumption of one-week repo auctions as a full normalization step within the liquidity framework.
Funding Costs
In the published report, it was recalled that with this move, the average funding cost and the TLREF rate declined from the 40 percent level to the 37 percent level.
September Expectation
Due to high inflation expectations and geopolitical uncertainties, it is anticipated that the policy rate will be kept constant at the Monetary Policy Committee meeting in September.
October Forecasts
The bank forecasts that the CBRT will realize its first interest rate cut of this year in October with a 100 basis point step, lowering the policy rate to the 36 percent level.
Future Years Forecast
BofA maintained its year-end inflation forecast at 29.5 percent, while announcing its end-2027 policy rate expectation as 32 percent and its inflation forecast as 26 percent.