TRY: Inflation slowdown paves way for further easing – BBH

Turkey’s central bank is expected to deliver another aggressive rate cut today, with inflation easing sharply and the disinflation trend gaining traction. Markets anticipate a 200bps move to 41.00%, while pricing in a total of 600bps of easing over the next quarter, BBH FX analysts report.

Core CPI falls to lowest since December 2021

"Turkey central bank (CBRT) is expected to slash rates 200bps to 41.00% (12:00pm London, 7:00am New York). The CBRT kept the policy rate unchanged in June and lowered it 300bps at its last July meeting 'in view of the decline in the underlying trend of inflation'."

"The disinflation process is ongoing and argues for a less restrictive policy stance. Core CPI inflation slowed to 33% y/y in August, the lowest since December 2021. Similarly, headline CPI inflation eased to 32.95% y/y in August, the lowest since November 2021 and is on track to fall within the bank’s forecast range between 25% and 29% by end of 2025."

"Over the next three months, the swaps market is pricing in 600bps of easing."