Morgan Stanley's Interest Rate Cut and Inflation Expectation

Morgan Stanley economists reported that if next week's August inflation data comes in lower than expected, the probability of the interest rate cut schedule being brought forward will increase.

Inflation and Interest Rate Cut

In a report published by Morgan Stanley, it was stated that if August inflation comes in significantly lower than expected, the probability of bringing forward the interest rate cut schedule will increase.

CPI and Annual Projections

Morgan Stanley economists, led by Georgi Deyanov, forecast that the August consumer price index, to be released on September 3, will show a monthly increase of 2.1 percent.

In the same analysis, it was emphasized that in line with these developments, annual inflation realizing at the level of 31.8 percent is among the expected scenarios.

CBRT Policy Schedule

The analysis included predictions that the Central Bank of the Republic of Turkey will skip September and proceed with interest rate cuts in October and December.

Changes in Funding Costs

With the CBRT resuming one-week repo auctions this week, the average funding cost dropped from 40 percent to 37 percent for the first time since February.

Evaluating these signs of monetary policy easing, Morgan Stanley forecasts that the CBRT will begin its interest rate cut cycle in the final quarter.

Year-End Policy Rate

In light of current data and steps taken, the report prepared by the international institution estimated that the policy rate will be lowered to 35 percent by the end of the year.