Istanbul stock exchange rally on leveraged rate cut expectations after inflation data

Released at market open, Türkiye’s better-than-expected February inflation data raised expectations of a significant interest cut, triggering a surge in the BIST 100 index, which jumped over 3.5% past the 10,000 mark for the first time in a month by midday Monday.

Bank stocks, in particular, were seen heading toward their highest daily gains in recent months.

As of 3:15 p.m. in local time (GMT+3), Akbank (AKBNK), Garanti (GARAN), Is Bank (ISCTR), and Yapi Kredi Bank (YKBNK) stocks were trading with gains ranging between 6.90% and 10.00%.

The holding index and industrial index were trading with gains of approximately 2.40% and 1.15%, respectively.

As of 4:10 p.m. in local time, the benchmark index slightly declined back to 9,976.

Rate cut expectations grow to 350 basis points

With inflation falling more than expected, Türkiye’s 2-year benchmark bond yield dropped to around 38%, while the interbank market saw the U.S. dollar exchange rate edged down to 36.46.

Analysts highlight that annual inflation has fallen below 40% while the policy rate remains at 45%, providing the Central Bank of the Republic of Türkiye (CBRT) with ample room for a rate cut.

Yapi Kredi economist Caglar Kimence noted that Türkiye is making steady progress in the disinflation process, emphasizing that a 250-basis-point rate cut at the Mar. 6 meeting would no longer be considered a surprise.

“The gap between the policy rate and inflation has widened to 600 basis points, giving the CBRT more room for maneuver,” he added.

Similarly, an assessment by Alnus Investment noted that with the annual CPI rate declining to 39.05%, a 595-basis-point real interest margin has emerged ahead of the CBRT’s rate decision.

“Therefore, we can say that a rate cut slightly above the market expectation of 250 basis points—potentially 350 basis points—is now on the table.”

The CBRT will announce its policy rate decision on Thursday, Mar. 6, at 2:00 p.m. local time, following its Monetary Policy Meeting.

Meanwhile, other key economic data released today, which contributed to this rally, are as follows:

• The banking sector’s net profit reached ₺47.3 billion ($1.28 billion) in January, marking a 48% increase compared to the ₺32 billion recorded in the same month last year, according to the Turkish Banking Regulation and Supervision Agency (BDDK).
• Türkiye’s Manufacturing Purchasing Managers Index (PMI), a key indicator of economic growth, rose from 48 to 48.3 in February. While the index remained below the critical 50 threshold, indicating continued contraction, a slight recovery was observed.