As the Central Bank of the Republic of Turkey (TCMB) prepares to announce its next interest rate decision on September 11, US-based investment banking company Goldman Sachs has adjusted its forecast. The bank now expects a 200 basis point cut, down from its previous 350 basis point projection, citing stronger-than-anticipated economic growth and higher inflation, according to a report by Reuters.
Growth and inflation shift expectations
Turkey’s second quarter GDP growth of 4.8 percent year on year significantly exceeded forecasts, even amid weaker domestic demand. Meanwhile, August inflation data came in hotter than expected. These indicators suggest that the TCMB will pursue a smaller rate cut compared to its previous monetary policy meeting.
In addition, US-based finance corporation JPMorgan also forecasts a policy rate cut of 200 basis points, compared to the previously anticipated 300 basis points.
Meanwhile, Dutch-headquartered international bank ING has stated that Turkey’s second quarter GDP data reflected a notable pick-up in annual growth - even amid tightening financial conditions and in addition to base effects. Contrary to expectations, the economy also gained momentum on a quarterly basis. “This stronger-than-expected performance may prompt the central bank to adopt a more cautious approach to interest rate cuts,” ING noted. Given the resilience in domestic demand, ING has raised its full-year GDP growth forecast for 2025 to 3.3 percent, up from the previous estimate of 2.7 percent.