UPDATE - Morgan Stanley Brings Forward Expectations for First Rate Cut from the Central Bank of Turkey to December

Morgan Stanley (NYSE:MS), following the announcement after the Central Bank of the Republic of Turkey’s (CBRT) Monetary Policy Committee meeting held yesterday, revised its expectation for the first interest rate cut from January to December.

"We interpreted the statement as the CBRT intending to make a measured cut in December, unless there is a significant upward surprise in public sector wages, prices in the November inflation, or currency volatility," stated Morgan Stanley. Considering the new forward guidance and risk balance from the Monetary Policy Committee (MPC), they emphasized they expect interest rate cuts to begin in December.

Morgan Stanley explained that as headline inflation is projected to decrease to 46.5% YoY in November (1.9%) and 44.5% YoY in December (1.5%), this would provide room for a 200 basis points interest rate cut in December, thus keeping real interest rates in positive territory. They noted, "Provided that inflation declines towards our year-end 2025 estimate of 26%, we expect the CBRT to make a 100-200 basis point cut until the policy rate reaches 28.5% in December 2025. Our predictions continue to imply that as headline inflation dips below 30% YoY, real interest rates will gradually fall from an average of 5% in the first half of 2025 to below 3% in the fourth quarter of 2025."