Most market participants expect the central bank to keep the policy rate unchanged at 37% when it meets on July 23, but pressure is building for a cut and some experts are calling for a wholesale shift in monetary policy.
The upcoming Monetary Policy Committee meeting carries extra weight because the central bank will not hold a meeting in August. The bank kept its benchmark one-week repo rate steady at 37% at its last meeting in June.
Banking and finance expert Professor Şenol Babuşcu said that the bank might opt for a limited, symbolic 100-basis-point rate cut. However, he said such a move would lack strong economic justification given the state of inflation.
'Since inflation has not fallen, the central bank should not lower interest rates,' Babuşcu told ANKA. 'An interest rate cut under these conditions would be an image-oriented move rather than an economic one.'
Annual inflation was 32.11% in June.
Babuşcu added that a minor cut would not create a meaningful drop in commercial, housing, vehicle, or personal loan rates. 'A longer process is needed before citizens planning to use credit feel a noticeable decline in interest rates,' he stated.
In contrast, economist Muhammet Bayram urged the central bank to avoid further delays in cutting rates. Bayram said that high interest rates place a heavy burden on the real sector, small businesses, and households.
'High interest rates hinder investment and production decisions,' Bayram said. He added that Turkey must move away from relying solely on high interest rates to attract foreign capital. 'Turkey needs to transition away from being a country that offers high interest rates, and instead build a reliable economic model that ensures sustainable growth.'
Bayram also said that the international atmosphere following the recent NATO Summit in Ankara presents an economic opportunity the bank should lean into. 'Diplomatic contacts and defense industry agreements are positively affecting investor perception,' Bayram said.
Despite the debates, institutional surveys point to a pause. The bank’s June Market Participants Survey of 68 professionals showed a median expectation of 37% for the July meeting. Similarly, polls by Bloomberg HT, CNBC-e, and Anadolu Agency show that most economists expect the central bank to hold the rate steady due to geopolitical risks and inflation levels.
