Garanti BBVA Expects an Interest Rate Cut in July
Mahmut Akten, CEO of Garanti BBVA, expects the Turkish central bank to implement its first—albeit moderate—interest rate cut at its upcoming meeting in July. If current trends in inflation and oil prices continue, further easing measures could follow in September.
In an interview with BloombergHT on June 24, Akten stated that the next meeting of the Monetary Policy Committee (MPC) on July 23 is expected to mark the start of a cautious cycle of interest rate cuts.
Falling oil prices bolster expectations
Expectations of monetary policy easing were bolstered by the recent decline in Brent crude oil prices. This was triggered by the ceasefire agreement between the U.S. and Iran, which temporarily eased concerns about energy supplies.
After the Turkish central bank had significantly raised its average Brent price forecast for 2026 from $60 to $89 per barrel on May 14, Brent crude oil was trading at only around $73 on June 25. Lower energy prices could ease inflationary pressures and give the central bank additional leeway to cut interest rates.
Disagreement Among Market Observers
However, not all analysts share the expectation of an imminent easing. As early as June 19, Bloomberg cited assessments by Alp Serbetli, head of the Treasury department at ICBC Turkey, according to whom the trend in forward overnight indexed lira swaps pointed against an interest rate cut in July.
These derivatives, which investors use to bet on future interest rate movements, fell by 275 basis points to around 38.2%. According to Serbetli’s assessment, the central bank could instead resume its one-week repo auctions and leave the policy rate unchanged for the time being.
Key Interest Rate Remains Stable So Far
At its most recent meeting on June 11, the Turkish central bank left the one-week repo rate unchanged at 37% for the third consecutive time. The overnight interest rate also remained unchanged at 40%.
The central bank has suspended its regular one-week repo auctions since March 1. It uses this instrument to manage market liquidity and steer banks toward the more expensive overnight facilities. As a result, both the weighted average refinancing costs and the TLREF reference rate currently stand at around 40%.
Goldman Sachs Remains Skeptical
Goldman Sachs takes a much more cautious view of the monetary policy outlook. The investment bank expects the official repo rate to remain unchanged through the end of the year and for banks to continue financing themselves primarily through the overnight window.
Analysts cite persistently high inflation expectations as the main reason. They forecast an inflation rate of over 30% by the end of 2026, which, in their view, argues against an early easing of monetary policy.
Whether the Turkish central bank will take its first interest rate cut as early as July or stick to its restrictive stance for the time being will therefore likely depend largely on how inflation, energy prices, and the geopolitical situation develop in the coming weeks.
