JPMorgan Anticipates First Rate Cut from Central Bank of Turkey in December, Forecasts Rate to Fall to 30% by September 2025

Forex - JPMorgan (NYSE:JPM) forecasts that the first interest rate cut by the Central Bank of the Republic of Turkey (CBRT) will come in December following the Monetary Policy Committee (MPC) meeting held yesterday.

JPMorgan economists anticipate that the CBRT will reduce rates by 200 basis points at every meeting from December until September 2025, bringing the interest rate down to 30%. However, they acknowledged that there are still uncertainties regarding the pace of these cuts.

JPMorgan's assessment of Turkey following the CBRT MPC meeting is as follows: "We are preparing for the next phase of trading in local Turkish markets. Since the beginning of the second quarter, we have maintained a bullish outlook on Turkish local assets with the belief that an 'emergency-level' monetary policy tightening, rapid reconstruction of foreign exchange reserves, and de-dollarization will provide ballast for local market yields. As the CBRT's policy cycle enters its next phase and begins to ease policies in upcoming meetings against a backdrop of increasing external risks for emerging markets, we believe it is prudent to adjust and reduce our bullish positions, with smaller long positions in foreign exchange and shorter-term risks in interest rates.

Factors such as the increase in the minimum wage in 2025 and the CBRT's interest rate cut will be driving forces for local Turkish markets in 2025. The Turkish lira market is currently pricing in almost entirely a 250 basis point rate cut by the CBRT in December and policy rates just above 30% by the end of the year. Our economist has also shifted the expectation for the first cut to December and, despite some uncertainties regarding the pace, anticipates consecutive 200 bp cuts to bring the policy rate to 30% by September."