Market Interest Rate Cut Expectations Boost BIST 100 Momentum

The Central Bank of the Republic of Turkey (CBRT) has kept the policy rate unchanged at 50%, and statements following this decision have strengthened expectations for a rate cut in December. The CBRT indicated that a decrease in the main trend of inflation was observed in October, highlighting that the slowdown in domestic demand supported this decline in inflation. While goods inflation remains low, clear signs of improvement in services inflation have emerged. However, this situation is not regarded as a definitive signal for a rate cut, and it is believed that the inflation data for November will significantly impact the Central Bank's decision on interest rates in December.

In the previous month’s Central Bank statement, there was an emphasis on uncertainties regarding the pace of improvement in inflation. In the new statement, this expression of uncertainty has been removed, and it was stated that the increasing coordination of fiscal policy would contribute to the process. The policy rate will be determined in line with inflation developments and expectations, indicating that the door is left open for a rate cut. Accordingly, if inflation in November falls below expectations, the likelihood of a rate cut could increase.

The possibility of a symbolic interest rate cut in December continues to be a topic of discussion in the markets. Hakan Aran, General Manager of Türkiye İş Bankası (IS:ISATR) (ISCTR), noted that a 250 basis point cut could have a soothing effect on the economy. However, market expectations suggest that a symbolic reduction is more likely.

The upward revisions made by the Central Bank in its year-end inflation targets are seen as the biggest obstacle to a large-scale reduction, while a 100 basis point cut has started to emerge as a more reasonable scenario.

As discussions about interest rate cuts continue, factors such as minimum wage increases and automatic price adjustments are also being considered. With the finalization of salary increases and tax regulations set for December, it is expected that the Central Bank will achieve a healthier interest rate decision.

The BIST 100 index rose over 3%

Before the interest rate decision, the BIST 100 index was at 9,130 points and increased to 9,314 points following the announcement. As the last hour approached, the BIST 100 index rose by 3.5%, while the banking index showed a 6.2% increase. Analysts continue to emphasize that, although optimism regarding a rate cut has increased, viewing the November inflation data is crucial. Moreover, the impacts of the escalating tension in the Russia-Ukraine war on the markets are also being closely monitored. If the upward trend continues, resistance levels between 9,350 and 9,500 points will be significant for the BIST 100.