Economist Atilla Yeşilada Urges Caution Ahead of Turkish Central Bank Rate Decision

ISTANBUL — As the Central Bank of the Republic of Turkey (CBRT) prepares to announce its first interest rate decision of 2026, prominent economist and market commentator Atilla Yeşilada has issued a warning against excessive “dovishness.” Speaking on Integral Forex TV with Perihan Tantuğ, Yeşilada argued that while the market has priced in a significant cut, the reality of “sticky” inflation may necessitate a more conservative approach.

The 150 vs. 100 Basis Point Debate

The current market consensus leans toward a 150-basis-point (bps) reduction in the policy rate. However, Yeşilada suggests that the CBRT would be better served by a “wait-and-see” strategy. While he expects the bank might ultimately deliver the 150 bps cut to align with market expectations and avoid stifling domestic sentiment, he maintains that a 100-basis-point cut would be more prudent.

“It is more logical to see the January inflation figures before making a bold move,” Yeşilada noted, highlighting that the pass-through effects of minimum wage hikes and New Year price adjustments remain uncertain. He warned that moving too fast could reignite demand for foreign currency, potentially undermining the stability the Lira has maintained throughout the winter.

Inflation Targets Under Scrutiny

The crux of the concern lies in the ambitious year-end inflation target of 16% for 2026. With the market expecting January inflation to land around 3.46% and his own forecasts trending closer to 4%, Yeşilada highlighted a looming “mathematical impossibility.”

If inflation reaches roughly 8% in the first quarter alone, the Central Bank would need to maintain monthly inflation below 1% for the remainder of the year to hit its target—a feat he described as extremely difficult given the current structural environment. He cautioned that if the CBRT loses its grip on this “pathway,” it risks losing the hard-earned credibility it built with foreign investors over the previous year.

Market Implications: The “BIST” Outlook

Regarding the impact on Borsa Istanbul (BIST), Yeşilada observed that a rate cut exceeding 150 bps might spark a temporary rally, particularly in the banking sector. However, he remains skeptical of chasing such spikes, viewing them more as opportunities for profit-taking rather than long-term entry points.

Looking further ahead into 2026, Yeşilada remains optimistic about the stock market’s potential to outperform fixed-income returns in the second half of the year. He suggested that as foreign investors find fewer attractive alternatives in emerging markets, “those who wait too long may find themselves unable to find shares at reasonable prices” once the inevitable rally begins.