Turkey’s Central Bank Outlook: Lower Inflation Expectations and Prospective Rate Cuts

Garanti BBVA General Manager Mahmut Akten indicated that the bank could revise its year‑end inflation forecast downward and expects modest easing of the policy‑rate band in the coming months. He said, “Üst bant belki biraz aşağı gelebilir,” pointing to a possible reduction in the effective interest rate after the July meeting.

Turkey’s central bank (TCMB) released June data showing that households’ 12‑month inflation expectations fell to 46.13 %, the lowest level in five years, while market participants’ expectations slipped to 23.81 %. Finance Minister Mehmet Şimşek linked the improvement to easing energy prices and reduced geopolitical tensions.

The Financial Services Confidence Index, based on responses from 150 institutions, declined by 1.2 points to 152.9 in June, reflecting weaker business sentiment despite a modest rise in forward‑looking service‑demand expectations. The business community, citing falling inflation and stabilising financial indicators, reiterated expectations that the central bank will cut rates in July and again in September to support production and investment.

Overall, Turkish policymakers and the banking sector anticipate a gradual shift from a tight monetary stance toward lower rates, as inflation expectations continue to recede.