Morgan Stanley Signals Possible June Rate Cut in Turkey If Conditions Align

Following the release of the Turkish Central Bank’s May Inflation Report, Morgan Stanley has adjusted its interest rate forecast, stating that if favorable conditions persist, the first policy rate cut could come as early as June, instead of the previously expected July.

In its post-report analysis, the U.S.-based investment bank noted that the CBRT’s decision to maintain its inflation forecast range signaled a strong commitment to its current policy stance. However, it also highlighted that the Central Bank has not ruled out the possibility of a rate cut at its next monetary policy meeting on June 19.

“The easing in interbank rates and the tone of recent CBRT communications suggest that the June PPK meeting could hold surprises,” the bank stated.

Two Key Preconditions for a June Cut

Morgan Stanley emphasized two conditions that could trigger an early cut:

1. May inflation comes in below 2%, in line with CBRT projections.

2. State-backed credit packages remain limited in scope, easing inflationary pressure.

If both criteria are met, the June 19 Monetary Policy Committee (PPK) meeting could see the first policy rate cut in the current cycle.

Carry Trade Opportunities Rising

The bank also pointed to rising opportunities in carry trade strategies, stating:

“Given current dynamics, we prefer short positions in 3-month USD/TRY forward contracts.”

This suggests growing confidence in Turkish lira stability, at least in the short term, as monetary policy tightness begins to tame inflation expectations.