Turkish central bank likely to slash policy rate by 100 basis points amid easing inflation

Market participants are focusing on the Oct. 22 Monetary Policy Committee session, where most forecasters anticipate a 100-basis-point cut to Turkey's policy rate after September inflation slipped to 29.73 percent, the first sub-30-percent reading since 2021. The central bank had kept the policy rate at 37 percent in its September meeting, along with the one-week repo, overnight lending and borrowing rates. A recent Survey of Market Participants projects another 100-basis-point cut in December and a further 65-basis-point reduction by Jan. 2027, with the rate possibly reaching the low-20s within two years.

Brokerage houses Tacirler Yatırım and Integral Yatırım say the inflation slowdown and weaker domestic demand create room for easing, but warn that stubborn near-term inflation expectations could curb the pace. Analyst Zeynel Balcı notes that a cut could boost both the stock market and the broader economy, especially as MSCI has frozen index adjustments for Turkish equities and threatens a downgrade if reforms are not demonstrated by June 2027. Finance Minister Mehmet Şimşek announced plans to finalize legal changes to combat capital-market crimes by early 2027, targeting coordinated fund transactions.