January CPI indicates caution on rate cuts: JP Morgan

ISTANBUL

The January CPI data and preliminary estimates for February CPI indicate a cautious approach to rate cuts in 2026, JP Morgan has said in a note.

Looking ahead, the Turkish Central Bank is expected to maintain the policy rate well above CPI inflation throughout 2026 to contain inflation, it added.

“We maintain our end-26 policy rate forecast of 30 percent, with risks to the upside, as elevated dollarization risks in the fourth quarter of 2026 necessitate the preservation of current levels of real rates,” it said.

“We continue to expect the Central Bank to cut by 100bp at each of the remaining seven Monetary Policy Committee meetings to 30 percent by the end of 2026,” the report highlighted.

The deteriorating inflation outlook was the main reason the Central Bank downsized the rate cut to 100bp on Jan. 22 and implemented coordinated macroprudential measures with the Banking Regulation and Supervision Agency (BDDK), it argued.

“However, we do not rule out a rate cut of less than 100bp on 12 March, given that February CPI is likely to be high due to the Ramadan impact on food and restaurant prices,” it concluded.