Central Bank of the Republic of Turkey's interest rate decision is in the focus of the markets

The Central Bank of the Republic of Turkey is expected to continue its pause on rate cuts as escalating tensions in the Middle East drive up energy prices and threaten the slowdown in inflation.

Expectation of Steady Interest Rates

According to a survey conducted by Bloomberg HT, the Monetary Policy Committee of the Central Bank of the Republic of Turkey is projected to keep the one-week repo rate steady at 37 percent for the fourth consecutive meeting.

Geopolitical Risks and Funding Costs

Following the outbreak of the war in Iran at the end of February, the CBRT halted weekly repo auctions and began funding banks at a higher overnight interest rate of 40 percent, effectively implementing a rate hike.

It is stated that policymakers are currently evaluating lowering the overnight lending rate or resuming weekly repo funding, but maintaining the current status quo remains the most likely scenario.

July Inflation and Monitoring Process

CBRT Governor Fatih Karahan had stated in a meeting with investors that the bank wants to see July inflation data and closely monitor developments in the region before making any policy shifts.

Turkey's position as a major energy importer indicates that fluctuations in oil and natural gas prices make the disinflation process fragile.

Forecasts of Foreign Institutions

Analyses by foreign financial institutions also indicate that the Central Bank of the Republic of Turkey will pass on the July meeting, while Morgan Stanley predicts that the disinflation process will proceed slower than anticipated and the first rate cut will only arrive in the fourth quarter.