Goldman Sachs economists have described the 300 basis point interest rate cut by the Central Bank of the Republic of Turkey (TCMB) as a “dovish surprise”, noting that the move exceeded market expectations despite falling short of their own 350 basis point forecast.
In a client note dated July 24, economists Clemens Grafe and Başak Edizgil commented that while the cut was slightly smaller than Goldman’s projection, it nonetheless surprised markets on the dovish side.
The report emphasized that the TCMB is likely to remain focused on inflation dynamics and domestic dollarization trends as it continues easing monetary policy in the months ahead.
The economists pointed out that if dollarization were to accelerate significantly, the central bank’s initial response would likely be to allow a slower depreciation of the Turkish lira, rather than returning to rate hikes as a tightening tool. In the event of deteriorating domestic political risk, Goldman Sachs anticipates a more cautious stance from the central bank.
Despite the surprise rate cut, Goldman Sachs maintained its year-end policy rate forecast, expecting interest rates to decline to 33% by the end of 2025.
Source: Bloomberght/ Prepared by: İlayda Gök