Morgan Stanley Expects Rate Cuts to Begin in July as Türkiye’s Inflation Declines

Istanbul – July 2025 | Global investment bank Morgan Stanley has projected that Türkiye’s inflation will continue to decelerate sharply over the summer, prompting the Central Bank of the Republic of Türkiye (CBRT) to begin its rate-cutting cycle in July.

First Cut in July: Policy Rate to Drop from 45% to 43.5%

According to the bank’s forecast:

• A 250 basis point cut is expected in July, bringing the policy rate down to 43.5%

• Three more 250 bp cuts are projected in subsequent meetings

• By year-end, the benchmark rate is expected to fall to 36%

Why the Shift? Internal Demand and Expectations Are Cooling

Morgan Stanley attributes this expected monetary easing to:

• A notable slowdown in domestic demand

• Falling inflation expectations among consumers and businesses

• The CBRT’s firm monetary policy stance, which has helped anchor price stability

Inflation Shocks Are Temporary, Not Structural

While price hikes in electricity (April) and natural gas (July) may temporarily inflate monthly CPI, the bank expects these effects to be transitory due to:

• CBRT’s cautious policy communication

• Improved inflation dynamics, especially in services and non-food segments

End-2025 Inflation Forecast Stands at 29%

Morgan Stanley has maintained its 29% year-end inflation estimate, anticipating that:

• Disinflation will accelerate throughout the second half of the year

• Liquidity management tools will be key in stabilizing the banking system and supporting CBRT’s inflation goals

Morgan Stanley’s Outlook Summary

“Türkiye’s tight monetary policy is working. Despite some regulated price hikes, we see inflationary pressures easing substantially. This gives the CBRT room to begin normalizing rates, with July marking the potential start of an easing cycle.”