Economists at Morgan Stanley and Goldman Sachs project that the Central Bank of the Republic of Turkey (CBRT) will keep the key interest rate unchanged at its meeting scheduled for this week.
A note released by Morgan Stanley on June 8, signed by economist Georgi Deyanov and strategist Arnav Gupta, points out that the weak performance of domestic demand should make the central bank adopt a cautious stance.
The document highlights that economic activity has lost momentum since the last meeting of the Monetary Policy Committee, in April. First quarter figures indicate stable private consumption, falling exports and signs of weaker demand for consumer durables in high-frequency indicators.
Even with the rise and instability in the prices of energy commodities, Deyanov and Gupta defend maintaining the basic rate at 37%, reiterating the monetary tightening bias. They noted that while the market expects stability around 37%, a rate closer to 40% could offer the central bank greater scope to deal with inflation and adjust policy in the future.
Morgan Stanley estimates that general inflation will decline in the fourth quarter of 2026. In this view, the CBRT would begin a gradual cycle of easing, with an initial reduction of 200 basis points in the base rate, to 35%. For 2027, the projection is for additional cuts that would take the rate to 27.50% at the end of the year.
The institution maintains a recommendation for a short position in the three-month carry trade in the USD/TRY pair. The expectation is that the Central Bank of Türkiye will sustain a controlled depreciation of the lira below what futures contracts indicate, with real interest rates still attractive enough to support the strategy.
Goldman Sachs also anticipates maintaining the rate.
On the other hand, Goldman Sachs estimates that this week’s meeting will mark the end of a cycle. In a note dated June 5, the bank predicted that, instead of raising interest rates, the CBRT should resort to regulatory measures on credit to tighten financial conditions. The analysis states that only strong dollarization pressure would lead the central bank to raise the base rate.
