Goldman Sachs' Unconventional Interest Rate Forecast for CBRT

While general consensus and pricing in the market expect an interest rate cut at the October 22 meeting, Goldman Sachs diverged from this expectation, announcing that it anticipates no changes in interest rates by the CBRT.

Market Expectations and Goldman Sachs

Market consensus and pricing indicate that the Central Bank of the Republic of Turkey will make its first policy rate cut at the October 22 meeting. However, the institution's forecast diverges from this expectation.

Goldman Sachs predicts that the CBRT will not make any changes in interest rates at the meeting in question.

Actual Cut and Operational Process

Evaluating the CBRT's reopening of the repo window on August 23, which effectively lowered the TL overnight reference interest rate by 300 basis points, Goldman Sachs stated that this move was a surprise.

The institution recalled that this move was described as the normalization of the operational framework rather than the beginning of an interest rate cut cycle.

Inflation Outlook and Expectations

Goldman Sachs cited the inflation outlook and developments in reserves among the reasons for its caution regarding an interest rate cut.

It was stated that core inflation has only just been able to return to its course prior to the energy price shock, and household expectations have risen.

Reserve Losses and Foreign Investor

According to Goldman Sachs, one of the most important developments has been the acceleration of reserve losses since the 300 basis point effective interest rate cut.

It was assessed that foreign bond inflows also did not show strong belief in the market's expectation of an interest rate cut.