by Burak Akinci
ANKARA, Nov. 27 (Xinhua) -- Türkiye might begin an easing cycle before year-end, as inflation expectations are improving due to government efforts that may lead to an interest rate cut, experts have predicted.
On Nov. 21, the Turkish central bank held its key interest rate steady at 50 percent for an eighth straight month, in line with market expectations.
"The underlying inflation trend had been showing signs of improvement in October," the bank said in a statement, but added that while inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process.
The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation, and inflation expectations converge to the projected forecast range, the bank said.
Türkiye has been grappling with rising inflation and one of the worst cost-of-living crises in its history. From June 2023 to March this year, the central bank raised its key interest rate from 8.5 percent to 50 percent to tighten monetary policy and has kept the interest rate unchanged since March.
Türkiye's annual inflation rate eased to 48.58 percent in October, according to the official data, still above the government forecasts.
Amid stubborn price pressures, the central bank earlier this month raised consumer inflation forecasts for this year and 2025, from previously 38 percent and 14 percent to 44 percent and 21 percent, respectively.
"Based upon the analysis of the previously taken stance of the central bank in its fight against inflation, I do not think that the central bank is going to reduce the policy rate in December," Arda Tunca, an Istanbul-based economist, told Xinhua.
Tunca said there is still a huge gap between the inflation rate target of the central bank and consumers' expectations for the upcoming 12 months.
However, unlike Tunca, many experts are more optimistic about an impending interest rate cut by the central bank that could take place as early as December, after they interpreted the central bank's recent communication as well as Turkish President Recep Tayyip Erdogan's remarks on Nov. 8 that "both inflation and borrowing costs will decrease."
ING Bank, a Dutch multinational banking and financial services corporation, said in a note to investors on Nov. 21 that the Turkish central bank "says that we are nearing a gradual rate-cutting cycle, implying that a December move could now be a real possibility."
"Accordingly, we continue to expect the bank to start cutting rates with a measured move in December, unless we see a negative surprise in November's inflation data" to be published on Dec. 3, it said.
Deutsche Bank, a German multinational investment bank and financial services company, concurred with ING Bank on the prediction.
Last week, the Independent Industrialists and Businessmen Association, one of Türkiye's top business associations, urged a "symbolic" rate cut in December, citing concerns over the high cost of doing business in the country.
Senol Babuscu, a professor of finance from capital city Ankara's Baskent University, told Xinhua that "the central bank has left the door open for a December rate cut."
A rate cut next month has become a "considerable option" in line with market expectations, he said, without specifying the size of the initial step.
Hakan Kara, a former chief economist at the central bank, also believes that "the central bank has moved closer to the possibility of a rate cut in December."
He said on social media platform X that the cut is likely to be a "limited" one, less than 250 basis points. ■
