With inflation remaining high and monetary easing delayed, the Central Bank of Turkey is expected to hold rates steady on Thursday, leaving only 200 basis points of room for rate cuts this year.

⑴ The Central Bank of Turkey is expected to keep its policy rate unchanged at 37% this Thursday. Among 17 surveyed economists, only one bets on a 100 basis point cut to 36%. ⑵ The market still expects a cumulative rate cut of 200 basis points by the end of the year, while the median policy rate forecast for the end of 2026 remains at 35%, consistent with last month's survey. ⑶ In July, the central bank kept rates on hold for the fourth consecutive time, stating that the impact of the Iran war on inflation remains a key monitoring variable. The fragile Iran peace process continues to influence policy expectations. ⑷ On August 24, the central bank resumed repo auctions, lowering the overnight rate from 40% to 37%. However, institutions believe this move is part of monetary policy normalization rather than a signal of a new round of policy easing. ⑸ Some institutions judge that, given the central bank previously eased policy at similar inflation levels before the war—and with August inflation data beating expectations and domestic demand weakening—there is a minor risk of a rate cut at Thursday's meeting. An unexpected rate cut could marginally increase the probability of early elections next year. ⑹ Other institutions view the October and December meetings as the main rate-cut windows, with each cut by 100 basis points, but at the same time consider that 300 basis points of easing have already been released through the repo side and ongoing external constraints as Brent crude stays above $95. ⑺ In the August 13 quarterly inflation report, the central bank kept its mid-year inflation target unchanged at 24% but raised its year-end inflation forecast to 28%, making the policy balance even more complicated. ⑻ Before the decision is announced on Thursday, market sentiment has turned cautious, with focus on marginal changes in the inflation path and geopolitical situation. There is still significant uncertainty as to whether the remaining easing space within the year can be realized.