Rate Cuts at Risk as Oil Shock Clouds Türkiye’s Monetary Outlook
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Escalating conflict in the Middle East and a potential surge in oil prices are complicating Türkiye’s monetary policy path. Economists warn that even if Brent crude stabilizes near $80 per barrel, the likelihood of a rate cut this month has diminished sharply. A move toward $90–100 could force the Central Bank to consider tightening instead. With inflation expectations still elevated, markets are reassessing the trajectory of interest rates.
Filiz Eryılmaz: Even $80 Oil Weakens the Case for a Cut
Assoc. Prof. Filiz Eryılmaz, Chief Economist at Pusula Investment, says the oil channel has materially shifted policy expectations.
According to Eryılmaz:
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If Brent stabilizes around $80, the probability of a rate cut this month becomes “very low.”
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If prices approach $90–100, the Central Bank of the Republic of Türkiye (CBRT) may be forced to hike.
February CPI, due shortly, is expected around 3.5% month-on-month. A print significantly above 3% could further reduce the odds of easing.
On equities, Eryılmaz anticipates a negative opening but not a market collapse, arguing that the BIST 100 holding above 13,000 would represent a relatively strong outcome under current conditions.
De Facto Tightening from the Central Bank
Market strategist Emre Değirmencioğlu describes recent CBRT actions as a form of “backdoor tightening.”
Central Bank of the Republic of Türkiye has:
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Launched TL-settled forward FX sales
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Suspended one-week repo auctions
With the policy rate at 37%, the weighted average funding cost could gradually rise toward the upper band of the interest corridor at 40%. In practical terms, this implies indirect tightening aimed at curbing FX demand and stabilizing markets.
USD/TRY opened the week around 43.96, while Türkiye’s five-year CDS rose to 238 basis points — its weakest level in three months.
Atilla Yeşilada: Oil Is the Real Risk
Economist Atilla Yeşilada argues that a disruption to Gulf energy infrastructure or shipping through the Strait of Hormuz would pose a significant threat to Türkiye’s macro outlook.
He notes that inflation was already fragile before the war:
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TEPAV February food index: +6.5% m/m
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Türk-İş kitchen expenditure index: +3.5% m/m
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January services inflation exceeded 7%
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Istanbul Chamber of Commerce February CPI: +3.85%
Inflation Expectations Remain Elevated
Recent surveys show only gradual improvement in expectations:
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Real sector inflation expectations fell just 0.9 points to 32%
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CBRT interim target: 16%, upper forecast band: 21%
Betam survey:
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12-month ahead expectation: 50.8%
Koç University survey:
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12-month ahead expectation: 52%
Although expectations have edged lower, they remain well above official targets. Even if headline inflation surprises on the downside, a rate cut in March could appear inconsistent in the current geopolitical environment.
What If Oil Rallies Further?
A sustained oil rally through early March would likely force the CBRT to fully abandon easing plans.
If inflation were to reaccelerate toward 35% in March–May:
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Real wage gains could erode quickly
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Rising costs and weaker European demand could pressure employment
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Economic stress could spill over into the political sphere
Market Implications
Short-term expectations:
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Cautious tone in equities
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Upside bias in gold
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Potential renewed FX demand
If the conflict persists and oil prices remain elevated, baseline macro scenarios for Türkiye may need to be revised.
