Global Banks Forecast Rate Cuts by Turkey’s Central Bank in H2 2025

Following the Central Bank of Turkey’s latest policy decision to hold rates steady, global financial institutions including JPMorgan, Citi, ING, and Deutsche Bank anticipate rate cuts in the second half of 2025. While inflation is expected to ease gradually, economists caution that upside risks remain.

After the Central Bank of the Republic of Turkey (CBRT) kept its policy rate unchanged at 46% last week, major international banks have released updated forecasts pointing to a potential shift toward monetary easing in the coming months.

CBRT Holds Rates Steady at June Meeting

At its June meeting, the CBRT left its one-week repo rate at 46%, in line with expectations. The overnight lending rate was maintained at 49%, while the overnight borrowing rate stayed at 44.5%.

Despite the hold, analysts observed a more dovish tone in the central bank’s forward guidance, which has prompted expectations for a potential rate-cut cycle starting as early as July.

JPMorgan: 250 bps Cut Expected at Every Meeting Starting in July

In a note led by Turkey economist Fatih Akçelik, JPMorgan said the CBRT’s June decision and statement were broadly consistent with expectations and reflect a cautious approach.

The bank expects the CBRT to begin cutting rates by 250 basis points per meeting, starting from July 24, bringing the policy rate down to 36% by year-end. JPMorgan noted that the bank aims to maintain real rates in positive territory to curb dollarization trends.

The note emphasized a shift in tone in the CBRT’s guidance:

“Instead of stating that policy will be tightened if needed, the CBRT now says it will use all tools effectively if there’s a ‘significant and persistent deterioration in the inflation outlook’—a more dovish stance that aligns with our expectations for cuts.”

Citi: July Cut Likely Unless Shock Emerges

Citi economists İlker Domaç and Gültekin Işıklar echoed a similar view, stating that unless an economic shock materializes, the CBRT is likely to cut rates by 250 basis points in July.

They maintained a cautious stance on inflation, forecasting that headline inflation could decline to around 30% by the end of 2025, down from 44.4% in 2024. However, they also flagged upward risks to this outlook.

“We remain cautious due to persistent price pressures and limited support from fiscal policy. Risks to inflation remain tilted to the upside.”

Capital Economics: “Path Now Open for Cuts”

William Jackson of Capital Economics said the door is now open for further rate reductions. Encouraged by recent inflation data and the CBRT’s more dovish messaging, Jackson expects interest rates to fall to 38% by year-end.

ING: CBRT Signals July Rate Cut

ING analysts noted that the CBRT refrained from hiking or cutting rates in June, but emphasized that forward guidance abandoned the tightening bias, suggesting a rate cut in July is likely.

While real interest rates remain historically high following the April hike, ING argues that macroeconomic indicators now support a shift toward policy easing. These include:

• Improving inflation expectations

• Clearer signs of a slowdown in Q2

• Renewed foreign capital inflows

• Declining demand for foreign exchange among locals, which has helped rebuild CBRT reserves

ING’s base case is for a 350 basis point cut to 42.5% in July, though survey participants expect a smaller 300 basis point cut to 43%. ING also noted that geopolitical risks may cause the CBRT to take a more gradual approach.

“Given prevailing geopolitical uncertainties and the CBRT’s cautious posture, we believe rate cuts could begin with smaller steps,” the bank wrote.

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