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Attention is turning to the Central Bank’s Monetary Policy Committee meeting on Oct. 22, where policymakers will decide on interest rates following recent turmoil in the country’s fund market.
Most economists expect the central bank to cut its policy rate by 100 basis points at this week’s meeting.
Expectations for a rate cut have been reinforced by September inflation data, which came in below market forecasts.
Türkiye’s annual consumer inflation rate stood at 29.73 percent in September, below market expectations of 30.3 percent, marking the first reading below 30 percent since November 2021. Consumer prices rose 1.84 percent month-on-month.
At its Sept. 10 meeting, the central bank kept the policy rate, the one-week repo auction rate, unchanged at 37 percent. The bank also maintained the overnight lending rate and overnight borrowing rate at 40 percent and 35.5 percent, respectively.
According to the central bank’s Survey of Market Participants published last week, respondents expect another average 100 basis-point rate cut at the December meeting, with the policy rate projected to fall to 35 percent.
For the Jan. 21, 2027 meeting, respondents expect a further average 65 basis-point reduction, bringing the policy rate to 34.35 percent.
The survey showed expectations for the policy rate to decline to 29.01 percent in 12 months, 27.93 percent by the end of next year and 22.39 percent in 24 months.
In a research note, brokerage house Tacirler Yatırım said the decline in annual inflation as of September and signs of cooling domestic demand were likely to create room for interest-rate cuts in the final quarter of the year.
The brokerage, however, said the scope for easing could narrow if the inflation outlook fails to improve as much as expected.
Integral Yatırım said persistent near-term inflation expectations would be among the key factors determining the pace of monetary easing, while declining longer-term inflation forecasts supported expectations for rate cuts.
“The pace of the expected easing will be determined by monthly inflation readings and the convergence of expectations,” Integral Yatırım said.
According to analyst Zeynel Balcı, a rate cut this week could create a positive backdrop for both the stock market and the real economy.
Balcı said negative market pricing had continued and noted that the decline in Borsa Istanbul, which began on Sept. 16 after problems emerged in the fund market, accelerated following a warning from MSCI.
MSCI on Oct. 15 announced an immediate, indefinite freeze on certain index-related adjustments for Turkish equities stemming from index reviews or corporate events.
Institutional investors will need to see credible and sustained enforcement against coordinated trading and disclosure standards that enable independent verification of the free float of Turkish securities, MSCI said.
MSCI stated that if sufficient progress is not demonstrated by June 2027, it will consider additional measures, including a consultation on a potential reclassification of the MSCI Türkiye Indexes from Emerging Market to Frontier or Standalone Market status.
“Emerging market status is an important matter of prestige for Borsa Istanbul,” Balcı said.
“More importantly, being relegated to a lower category would not only limit new foreign investor inflows but also risk losing existing investors. Therefore, it is of great importance that the warning is taken seriously and the necessary steps are taken,” he added.
Türkiye plans to complete legal changes to strengthen its fight against capital market crimes by the beginning of 2027, Treasury and Finance Minister Mehmet Şimşek announced on Oct. 16.
The planned measures will also address coordinated transactions by funds, Şimşek said in a statement in a social media post.
