WOOD Flash – Türkiye macro: CBT reaffirms prolonged pause
The Monetary Council maintained the policy rate (the 1W repo rate) at 50% at its meeting yesterday (20 August), as we expected. The statement maintained a hawkish tone, and narrowed the focus towards closing the gap between inflation expectations and the bank’s forecast, which suggests, to us, that the bar for rate cuts is possibly higher than many expect and aligns with our view that the backdrop is not conducive for rate cuts before the second half of next year. The positive spillovers from maintaining tight financial conditions are visible across the economy and have also resulted in a material slowdown in house price inflation. That said, housing remains unaffordable for the masses, financed with mortgages, and will continue to remain so in the medium term. Looking ahead, we expect the policy rate to remain flat, at 50%, this year, before easing to 42% by the end of next year.
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