HSBC’s front-loaded easing forecast for Turkey

While foreign institutions maintained their forecasts for no monetary policy easing in Turkey this year, the latest analysis from HSBC pointed to the expectation of front-loaded interest rate cuts in 2025.

In a report prepared by HSBC CEEMEA Economist Melis Metiner dated September 9, it was stated that the bank maintains its expectation that there will be no interest rate cuts in Turkey this year, but predicts that interest rate cuts will be front-loaded in 2025.

Metiner said they expect front-loaded rate cuts in the first half of the year.

The report stated that the fiscal consolidation process will support price pressures, but the outlook is uncertain.

In the assessment, it was said that a gradual policy is more likely for 2025.

In the report, while the soft landing expectation for Turkey was maintained, it was emphasized that the risks to growth remained on the downside. HSBC had lowered its growth expectation for this year to 3 percent.

“If the authorities are serious about anchoring inflation expectations closer to target, we would expect to see a pace of easing that would keep real interest rates high for an extended period. A more ambitious fiscal consolidation in 2025 will help fight inflation, but we remain of the view that policymakers will tend to adopt a relatively more accommodative stance to avoid a hard landing.”