Is Bankasi CEO predicts November rate cut as Türkiye battles inflation

Türkiye’s first national bank, Is Bankasi, CEO Hakan Aran has warned that Türkiye’s economic challenges will persist into 2025, despite potential easing in some areas. He anticipates a 250 basis point rate cut from the Turkish central bank in November, as the country continues to grapple with high inflation and global economic pressures. Aran also highlighted concerns over the deteriorating asset quality in the banking sector and the need for long-term structural reforms to stabilize the economy.

What will 2025 bring to Türkiye’s economy?

• 2025 outlook: CEO Hakan Aran has warned that Türkiye’s economic challenges will continue through 2025. He emphasized that the struggle to achieve price stability and control inflation will come at a significant cost, with banks and consumers alike bearing the brunt of these efforts.
• Sectoral impact: Aran noted that the deterioration in asset quality, particularly within consumer loans, became evident in July. Non-performing loans (NPLs) have surged, with total frozen receivables reaching ₺216.5 billion by June 30. Of this, ₺147.9 billion comes from commercial loans, and ₺68.8 billion from consumer loans, with credit card debt alone more than doubling to ₺31.2 billion since the start of the year.

When Türkiye cut 50% interest rate?

• November cut: Aran expects the Central Bank of the Republic of Türkiye (CBRT) to initiate a 250 basis point rate cut in November. This is based on projections that inflation could fall below the policy rate by October, potentially leading to a gradual easing of monetary policy. He predicts that by the end of 2024, the policy rate could drop to 45%, and by the end of 2025, it might reach 25%.
• 38 TL/USD: The dollar rate peaked at ₺34 yesterday but showed some relief in the afternoon. Aran anticipates the exchange rate to rise to approximately ₺38 by year’s end. He also mentioned that, barring any renewed trend towards dollarization, the CBRT might maintain its current stance. However, he cautioned that any signs of dollarization could disrupt this process.

When will inflation decrease in Türkiye?

• End of 2025: Aran forecasted that inflation would reach around 42% by the end of this year, decreasing to about 20% by the end of 2025. He stressed that these projections hinge on maintaining a balance between inflation control and supporting the real sector, easing credit restrictions, and stabilizing the CBRT’s reserves. Aran underscored the importance of avoiding measures that could harm the production and export-driven economic model.
• US influence: The CEO highlighted the additional pressure exerted by global economic factors, particularly following U.S. Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium. Powell’s comments on the need for high global interest rates to combat inflation add complexity to Türkiye’s economic strategy.

How can Türkiye achieve sustainable economic growth?

• Long-term reforms: Aran emphasized that achieving sustainable economic growth would require long-term structural reforms and projects to avoid future economic imbalances. He pointed out that maintaining a stable economy, with a focus on production and export, is crucial for Türkiye’s future.
• Employment and production: Aran noted that the current economic environment is one where achieving price stability and reducing inflation involves significant trade-offs. He stressed the importance of considering the broader implications of economic policies, particularly on employment and production, warning that the path to normalization will be difficult.

Is Bankasi celebrates its 100th anniversary

• Global Expansion: Looking forward, Is Bankasi aims to expand its global presence, particularly in Europe. Aran detailed the bank’s strategy to become one of the world’s top 10 banks by customer base and profitability. The bank is pursuing strategic partnerships and acquisitions, particularly in digital banking, to achieve this goal.
• Milestones and Achievements: Celebrating its 100th anniversary, Is Bankasi has grown from a small institution with two branches and 37 employees in 1924 to a major financial player with over 1,000 branches today. The bank has been a pioneer in various sectors, from digital banking to renewable energy, and continues to innovate as it moves into its second century.