İTO head expects Central Bank to cut interest rate this month
ISTANBUL
Şekib Avdagiç, president of the Istanbul Chamber of Commerce (İTO), expects the Central Bank to cut its policy rate by 250 bps at the rate setting meeting this month.
The bank kept the key interest rate, the one-week repo auction rate, on hold for an eighth straight month at 50 percent in November.
The bank’s Monetary Policy Committee is scheduled to meet on Dec. 26 to decide about the interest rate.
“This [the rate cut] will be a step in line with inflation, which is on a reasonable downward trend, and its psychological contribution will be important as we enter 2025,” Avdagiç told Anadolu Agency in an interview.
Meanwhile, analysts at Citi said in a recent report that they expect easing cycle to begin in December with a 250 bps cut and see the policy rate at 30 percent by the end of 2025.
"We concur that a less aggressive easing cannot be entirely ruled out depending on the developments regarding residents’ FX deposits, the exchange rate and reserve accumulation,” they added.
The priorities of the financial circles at home and abroad and the priorities of the business circles in Türkiye do not completely overlap, Avdagiç stressed.
The foreign exchange (FX) basket has risen around 14 to 15 percent in the last 11 months, while the annual inflation is around 43 percent, said Avdagiç, adding that this is not sustainable for exporters.
“Many exporters will end 2024 with a reasonable profit or limited loss…We will need to be cautious about how things will unfold next year. On the one hand, a weak Turkish Lira makes imports more attractive, on the other hand depressing exports,” said Avdagiç, anticipating that the foreign trade deficit may widen.
