Bank of America has adjusted its outlook for Turkey's next monetary policy decision, reducing the expected pace of easing at the March 12 meeting. The bank now anticipates a 50 basis point reduction in the policy rate, down from its earlier projection of a 100 basis point cut.
Under the revised view, BofA forecasts the Central Bank of the Republic of Turkey - CBRT - will set its policy rate at 36.50% in March. That contrasts with the bank's prior estimate of a 36.00% rate after March's decision.
The change in the near-term call follows BofA's updated inflation expectations. The bank projects February's monthly inflation reading at 2.74%, which would lift the year-on-year rate to 31.25%. That would mark an increase from January's 30.65% and December's 30.89%, according to BofA's calculations.
Looking beyond March, BofA still expects a renewed pace of large easing moves. The bank anticipates monetary policy easing to revert to 100 basis points per meeting from April, before decelerating to a 50 basis point reduction at the December meeting. On that path, BofA's forecast implies a year-end policy rate of 31%, slightly higher than its earlier projection of 30%.
BofA attributes the revision in its March call to several factors: inflation outturns for January and February that were stronger than expected, a new Consumer Price Index path that appears more persistent, and central bank communications that point to continued easing but potentially at a more measured pace in the near term.
Despite the altered timing for rate cuts, BofA retains its projection that inflation will slow to 24% by the end of the year. That forecast sits above the CBRT's own forecast range, underscoring BofA's assessment that inflationary pressures may remain elevated even as the easing cycle proceeds.
Context and implications
The adjustment tightens BofA's immediate outlook for Turkish policy while preserving a framework of significant easing over the rest of the year. The bank's view signals a more gradual near-term shift in policy than previously expected, before larger cuts resume from April onward.