New Turkish central bank governor likely to cut rates further

The Turkish MPC’s 50bp cut in the overnight lending rate today, to 10.0%, was pinned on the recent improvement in inflation (although political pressure no doubt played a role) and with the headline rate likely to edge down further in the coming months, several more cuts are likely. Judging by today’s meeting, new governor Murat Cetinkaya may be a little more dovish than we had thought. Accordingly, we have tweaked our interest rate forecast and now expect the O/N rate to be cut to 8.5% this year.