Türkiye’s year-end inflation forecast revised upward, no rate cuts expected in April

Spanish lender BBVA has revised its year-end inflation forecast for Türkiye from 29% to 32%, citing expected spillover effects from the recent depreciation of the Turkish lira. On the other hand, Is Investment, the investment arm of Türkiye’s largest private bank, Isbank, does not expect the Central Bank of the Republic of Türkiye (CBRT) to rush into cutting interest rates in the April meeting.

The lira has weakened by around 4% following heightened political tensions, including a corruption probe launched on March 19 targeting Istanbul Mayor Ekrem Imamoglu. The USD/TRY exchange rate closed the week at 37.9907 as of Friday, 6.00 p.m. local time (GMT+3).

In an inflation note published Friday, BBVA Research reported that seasonally adjusted monthly inflation rose to 2.61% in March, up from 2.33% in February. “This increase pushes the three-month average inflation trend to 2.8% in March, up from 2.6%,” the note stated.

The report added that the recent depreciation in the exchange rate is expected to contribute an additional 2 to 3 percentage points to inflation. The revised forecast also factors in assumptions such as real exchange rate appreciation, planned energy price hikes, no further increases to the minimum wage, and a slightly tighter monetary policy than previously anticipated.

Türkiye’s annual inflation continued its improvement in March, extending the decline to a 10th consecutive month at 38.10%, the Turkish Statistical Institute (TurkStat) reported on Thursday.

No rate cut expected in April

In its inflation assessment released Friday, Is Investment forecast a gradual easing cycle beginning in June, with 250 basis point rate cuts.

Is Investment noted that the better-than-expected inflation data has eased pressure on the CBRT to sustain implicit tightening.

The note predicted that the CBRT is likely to hold its policy rate steady in its April meeting. However, it may lower the overnight lending rate—which was recently raised to 46% as part of measures to curb market volatility—back down to the 42.5% policy rate in May.

The CBRT will announce its policy rate decision following its Monetary Policy Committee meeting on April 17 at 2:00 p.m. local time (GMT +3).