Barclays, the U.K.’s second-biggest bank, expects Turkish monetary policymakers to cut interest rates three times by the year-end, the Diken news website reported on Monday.
Turkey’s central bank is likely to reduce borrowing costs by 75 basis points, or 0.75 percentage points, in October, November and December, lowering rates to 15.75 percent by the year-end, Barclays said, according to Diken.
The central bank unexpectedly cut its benchmark interest rate to 18 percent from 19 percent last month. President Recep Tayyip Erdogan is calling for cheaper borrowing costs to help spur manufacturing activity and exports. The Sept. 23 rate decision helped send the lira to a fresh record low of 8.96 per dollar on Sept. 29.
Barclays said it expects inflation in Turkey to slow to 17.9 percent by December. Consumer price inflation accelerated to 19.58 percent in September from 19.25 percent the previous month, the Turkish Statistical Institute reported on Monday. Turkey’s inflation rate is the highest in major emerging markets outside of crisis-hit Argentina.
Spanish bank BBVA said domestic demand in the country is likely to remain strong and high food inflation and energy price hikes maintain risks on the upside for the inflation outlook.
“We expect consumer inflation to increase further in October before declining to near 17 percent at the end of the year, led by the decline on positive base effects. Risks are clearly on the upside on our forecast, challenging the recent easing bias of the CBRT,” BBVA said in a report, according to currency news and analysis website FXStreet.
The lira was trading down 0.2 percent at 8.86 per dollar in Istanbul on Tuesday.