International finance institutions lower Turkiye’s inflation forecasts

US-based investment banks J.P. Morgan, Morgan Stanley estimate inflation to fall to around 42% by end of year, and to around 25% at end of 2025

International finance institutions have lowered their inflation forecasts for Türkiye following June’s slowdown in inflation.

Türkiye’s Consumer Price Index (CPI) climbed 1.64% and the Domestic Producer Price Index (D-PPI) 1.38% month-on-month in June, according to the country’s statistical bureau.

These figures showed a slowdown in inflation from May, when CPI was at 3.37%.

Following these changes, US investment bank J.P. Morgan downgraded its inflation forecast for Türkiye from 43.5% to 42.5% for the end of 2024, and from 25.2% to 25% for the end of 2025.

A bank report said disinflation started in June and would further accelerate in July and August.

US-based investment bank Goldman Sachs said in a report that while inflation is expected to accelerate in July due to regulatory changes and some normalization in core CPI, inflation may continue to weaken in the second half of the year, and the bank estimates inflation is set to fall to 36% by the end of the year.

The report said the Turkish Central Bank may loosen monetary policy and introduce an interest rate cut at the end of the third quarter, considering the appreciation of the Turkish lira and the slowdown in inflation.

Morgan Stanley, a New York-based investment bank, lowered its inflation forecast for Türkiye from 43.4% to 42.4% for the end of the year, and to 25.2% for the end of 2025.

A bank report said Türkiye had a faster-than-expected start to disinflation,for which tight monetary policy has been a key player.

It emphasized that the Central Bank may maintain its tight monetary policy due to risks to the inflation outlook, as the high course of services inflation and managed price increases continue to fuel risks.

UK-based bank Barclays lowered its inflation forecast for Türkiye from 44.5% to 44% at the end of the year, estimating 30.8% inflation for the end of 2025, as the bank noted that the high base effect may contribute to a slowdown in inflation in July and August.

Barclays said the Central Bank may make its first interest rate cut in January, though it may also consider loosening monetary policy in the fourth quarter.

London-based HSBC reported that the suppression of inflation increased the appeal of the Turkish lira through high real interest rates, as the bank stated that June’s inflation was positive for the country’s central bank.

Swiss investment bank UBS said in a report that Türkiye’s annual inflation is on track to fall below 50% levels by August, estimating 45% inflation by the end of the year.

A report stressed that recent developments such as no increase in the minimum wage and the slowdown in credit growth are positive and said the Central Bank may have the opportunity to cut interest rates in the fourth quarter.

Source: aa

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