Global banks expect Turkish rate cut later this year

ISTANBUL  

International banks have published updated inflation and interest-rate forecasts for Türkiye following the release of July inflation data, with BBVA Research expecting the policy rate to decline to 36 percent by year-end if conditions allow, while Citi maintained a cautious stance on monetary policy and Goldman Sachs argued that interest rates may need to remain elevated for longer.

BBVA Research said it expects the cost of funding to begin normalizing toward the policy rate from September onward and, “provided conditions allow, the policy rate to decline to 36 percent by year-end.”

According to BBVA, the lagged impact of fuel-price adjustments, together with expected time-dependent price increases, could create upward pressure on inflation during August and September.

“Assuming a normalization in energy prices and a prudent policy mix in the second half of 2026, we maintain our 30 percent year-end inflation forecast,” it said.

In a research note, Citi estimated that inflation could reach 31.8 percent at the end of 2026, reflecting the impact of structural factors and volatile energy prices.

According to Citi analysts, the Central Bank has only limited room to lower interest rates in the second half of the year, saying that maintaining a prudent monetary policy stance remains essential.

Citi projected that the policy rate would end the year at 35 percent.

Goldman Sachs argued that interest rates in Türkiye may need to remain elevated for a longer period.

At its July meeting, the Central Bank kept its policy rate unchanged at 37 percent, as the markets expected, extending its monetary policy pause for a fourth consecutive meeting.
The next rate-setting meeting is scheduled for Sept. 10.

Türkiye’s annual consumer inflation eased from 32.11 percent in June to 31.75 percent in July, according to official data released on Aug. 3.