Key Moments
- Commerzbank’s Tatha Ghose expects the Central Bank of Turkey to leave its policy rate unchanged at today’s meeting, describing the move as a tactical pause.
- The bank continues to view recent rate cuts as “unjustified and dangerous for asset prices” amid entrenched inflation and a deteriorating current account.
- A continued, controlled depreciation path is projected for the Turkish lira, including in USD/TRY, with the exchange rate seen weakening in “managed steps and downward breaks.”
Assessment of the Central Bank of Turkey’s Policy Stance
Commerzbank strategist Tatha Ghose anticipates that the Central Bank of Turkey (CBT) will refrain from adjusting its policy rate at today’s monetary policy meeting. He interprets this as a short-term, tactical decision rather than evidence of a broader reconsideration of the current policy framework.
According to Ghose, policymakers had, until recently, continued to signal a dovish inclination. However, he notes that market volatility linked to the Iran war is likely to constrain their willingness to proceed further with rate cuts for now.
Inflation Dynamics and Policy Critique
Ghose highlights that the inflation backdrop remains concerning. He points to Commerzbank’s preferred inflation gauge, which is based on seasonally adjusted month-on-month movements in core prices, stating that:
“Our preferred inflation measure, which is calculated from month-on-month changes of core price levels (seasonally-adjusted), is still running at a pace of nearly 3%m/m.”
Against this inflation setting and a worsening current account, Ghose reiterates a critical view of the CBT’s recent easing steps, writing:
“Nevertheless, we remind readers that we view all recent rate cuts as unjustified and dangerous for asset prices.”
Outlook for the Turkish Lira and USD/TRY
Commerzbank expects the Turkish lira to remain under pressure against major currencies, including USD/TRY. Ghose projects that the lira will continue along a controlled weakening trajectory that mirrors its recent trading behavior:
“We forecast the lira exchange rate to keep depreciating at a steady pace, following its recent pattern of managed steps and downward breaks.”
Key Policy and Market Metrics
| Topic | Commerzbank View |
|---|---|
| Policy rate decision at today’s CBT meeting | “Turkey’s central bank (CBT) will most likely keep its policy rate on hold at today’s monetary policy meeting.” |
| Inflation indicator (seasonally adjusted core, m/m) | “…still running at a pace of nearly 3%m/m.” |
| Assessment of recent rate cuts | “…we view all recent rate cuts as unjustified and dangerous for asset prices.” |
| Lira exchange rate trajectory (including USD/TRY) | “We forecast the lira exchange rate to keep depreciating at a steady pace, following its recent pattern of managed steps and downward breaks.” |
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