A broad consensus that Turkey’s central bank will deliver 200 basis points of easing before the end of the year remains intact, analysts at HSBC (London/HSBA) said on September 29 in a note to investors.

The primary focus of debate among investors tracking Turkey’s monetary policy has, however, shifted to the anticipated pace and duration of rate reductions heading into next year, according to the strategists at the British bank.

The key issue for the markets is whether the easing cycle will spill over significantly into next year, they wrote, adding that historical trends and their analysis suggest that when the easing process resumes, short-term rates are likely to benefit.

Market pricing currently implies a remarkably constrained path for policy adjustments compared to previous easing cycles, which have often been characterised by rapid and aggressive cuts.

28% or 34% in 2027?

According to the HSBC analysis, the current cycle can be viewed in two distinct phases. In the first phase, covering the remainder of 2026, there is broad agreement centred on a 200-bp reduction in the benchmark one-week repo rate by the year’s end.

With markets already pricing in roughly 150 bp of cuts, HSBC observed that this baseline represented a relatively low hurdle to clear.

As regards the second phase, taking in next year’s horizon, the markets are taking a cautious stance, pricing in only about 300 bp of easing across the entire cycle. This implies the one-week repo rate will stabilise near 34%.

That market projection sits well above consensus expectations. Bloomberg’s survey of economists foresees rates falling to 28% in 2027.

The HSBC team attributed the divergence to heightened risk aversion among traders, driven by both domestic headwinds and global conditions, including persistent geopolitical tensions and elevated international interest rates.

Benchmark held at 37% since January

On September 10, Turkey left its main policy rate (one-week repo) unchanged at 37% for a fifth consecutive meeting in line with expectations.

The final two rate-setting meetings of the year are scheduled for October 22 and December 10. A cut of 100 bp at each meeting is on the cards.

On August 13, the central bank raised its end-2026 official inflation "forecast" to 28% in its latest quarterly inflation report. On September 6, the end-2026 official inflation target was hiked to 28.4% in the government’s latest medium-term programme (OVP).

Amid the ongoing Iran War, financial institutions’ forecasts have broken through the 30%-level in response to the course taken by oil prices.

Since April, Turkey’s statistical institute (TUIK, or TurkStat) has released official annual inflation at 32% (with the rounding of decimals). Since July 2025, the figure has been released at between 30.65% and 33.52%.

On November 12, the central bank will publish its next quarterly inflation report, the fourth and last of 2026. It will include updated forecasts.