HSBC sees Türkiye’s interest rate falling to 30% by late 2025, warns of inflation risks

U.K.-based investment bank HSBC forecasted that the Central Bank of the Republic of Türkiye (CBRT) may lower its policy interest rate to 30% by the end of 2025, adding that the monetary authority is likely to continue cutting rates, potentially by 250 basis points at each policy meeting until October of next year.

However, HSBC also signaled caution, suggesting that recent government and central bank actions—particularly amid renewed political and economic uncertainty—could slow the pace of monetary easing. The bank said recent developments have introduced new risks that may delay or moderate future rate cuts.

Before this week’s political changes, HSBC had projected Türkiye’s inflation for March at 2.3% on a monthly basis, 37.8% annually, and expected inflation to decline to 30% by year-end. While it has not yet revised these forecasts, the bank acknowledged that the recent depreciation of the Turkish lira could pose upside risks, potentially pushing inflation higher than previously expected.

Turkish central bank announces measures to stabilize markets

In an effort to calm recent financial market volatility and reinforce its tightening stance, the Turkish central bank decided on the following measures this week:

• The overnight lending rate was raised to 46% by the CBRT, to manage short-term liquidity and signal a tighter monetary stance.
• Turkish lira-settled foreign exchange forward-selling transactions were introduced to allow businesses to hedge against currency volatility and to reduce pressure on the lira.
• One-week repo auctions, typically used to inject short-term liquidity into the banking system, were temporarily suspended by the central bank.
• Liquidity notes with maturities of up to 91 days were announced to be issued in order to absorb excess cash, regulate the money supply, and control inflation.

Meanwhile, France-based investment bank Societe Generale (SocGen) announced that it has exited its short position in the U.S. dollar/Turkish lira (USD/TRY) currency pair, citing limited room for further appreciation in the lira’s value.