JPMorgan Türkiye chief predicts interest-rate cuts by October

Central Bank of the Republic of Türkiye (CBRT) may initiate interest-rate cuts as early as October, according to Mustafa Bagriacik, Senior Country Officer for JPMorgan Chase & Co. in Türkiye.

This projection comes despite official guidance suggesting that price stability might take longer to achieve.

Official stance on rate cuts

“We expect central bank rate cuts to begin in October or November, which will be a sign that resilient inflation is going down,” Bagriacik said in an interview with Bloomberg.

He attributed the anticipated cuts to the government’s new economic program implemented over the past year, which has significantly impacted the markets.

This prediction contrasts with the Türkiye central bank officials’ stance.

Earlier this month, the Governor of the CBRT stated in an interview with Bloomberg that he would not consider easing rates until inflation targets are firmly within reach.

Economic turnaround, investor confidence

Since Mehmet Simsek’s appointment as Finance Minister last year, Türkiye’s economic policies have undergone a substantial overhaul.

This shift has stabilized the lira and attracted tens of billions of dollars in foreign investments.

Consequently, the Turkish central bank has been able to reduce its foreign exchange liabilities at an unprecedented rate, bolstering its ability to combat inflation, which has started to cool after peaking at 75.5% in May.

“In the past year, Türkiye has strengthened its reserves more than it had in the previous five years,” Bagriacik noted.

“Now Türkiye is giving markets and investors more comfort,” he added, highlighting that Türkiye is currently priced two or three notches above its rating.

Positive outlook from Credit Rating Agencies

Following Moody’s Ratings’ two-notch upgrade earlier this month, Bagriacik anticipates further upgrades within the next 12 months. This optimism is based on an improving budget deficit and a relatively low debt-to-GDP ratio of about 35%.

The Moody’s upgrade, the first in 11 years, raised Türkiye to B1 from B3 with a positive outlook, aligning with ratings from S&P Global Ratings and Fitch Ratings.

Bagriacik also forecasts an increase in mergers and acquisitions starting in 2025.

He expects international investors to shift from fixed-income to equities as the government’s economic program continues to deliver results.

Green energy transactions are expected to lead the M&A deal flow.