Goldman Sachs Flags Slower Rate Cuts for Turkey

Global investment bank Goldman Sachs has signaled that Turkey’s monetary easing cycle could be more limited than previously expected, citing strong economic growth and persistent inflationary pressures. In a fresh assessment following the Turkish central bank’s latest Inflation Report, the bank projected that the total scope of interest rate cuts may fall short of earlier forecasts.

The analysis follows the Central Bank of the Republic of Turkey (TCMB)‘s first 2026 Inflation Report presentation, an event closely watched by investors for guidance on the future direction of monetary policy. While markets had anticipated a relatively substantial easing path, Goldman Sachs now suggests the central bank may adopt a more cautious stance.

At the heart of the issue is the delicate balance between economic growth and price stability. According to the bank’s analysts, Turkey’s ongoing growth momentum risks placing renewed upward pressure on inflation, potentially complicating the central bank’s disinflation strategy.

900 Basis Points Cut Now Seen as Optimistic

Goldman Sachs previously expected a cumulative 900 basis points of rate cuts over the easing cycle. However, the latest note indicates that such projections may be overly optimistic given current conditions. The report suggests that total rate reductions could remain below 900 basis points, as inflationary dynamics continue to demand vigilance.

The bank emphasized that maintaining a “hawkish” monetary stance would likely be necessary to align economic expansion with inflation targets. In practical terms, this means the TCMB may slow the pace of cuts or reduce the overall magnitude of easing compared to earlier expectations.

This revised outlook highlights how macroeconomic data can rapidly reshape monetary policy forecasts. Strong domestic demand, credit expansion, and resilient activity indicators may support growth, but they also risk fueling price pressures if not carefully managed.

Alternative Tightening Tools in Focus

A notable aspect of Goldman Sachs’ analysis is its view on policy instruments. Rather than relying solely on changes to the benchmark policy rate, the bank suggested that additional tightening could come through alternative channels if required.

Specifically, the report pointed to the possibility of narrowing credit growth limits and implementing quantitative tightening measures. Such measures would aim to curb liquidity and moderate lending expansion without necessarily raising the headline policy rate.

TCMB Revises 2026 Inflation Forecast

During its Inflation Report presentation, the TCMB updated its year-end 2026 inflation forecast, revising the target band to 15%-21%. The updated projection signals that policymakers remain cautious about the disinflation path and recognize ongoing risks.

Central bank officials also delivered clear forward guidance. They stated that if credit growth accelerates beyond projected levels, additional credit tightening measures could be introduced without delay. The revised inflation band and the warning about credit expansion underscore a critical theme: policymakers are determined to prevent premature financial easing that could undermine progress on price stability.