The Turkish central bank is all but sure to slow the pace of its interest rate cuts when its policymakers meet this week, according to surveys, as they appear to be growing more concerned about inflation.

Türkiye’s annual inflation rate came in at 33.3% in September, more than expected and marking the first annual rise since a peak of 75.4% in May last year.

Monthly and annual readings were also higher than expected in August.

The Central Bank of the Republic of Türkiye (CBRT) lowered its benchmark one-week repo rate by 250 and 300 basis points in September and July, respectively.

Economists expect it to deliver a 100 basis-point cut this week to 39.5%, according to surveys by Anadolu Agency (AA) and Reuters.

But predictions in the Reuters poll were quite scattered, reflecting uncertainty over how the bank would respond to recently high price readings.

Four of the 17 respondents expected the bank to pause its easing, while five predicted a 150-point cut and two saw a 250-point reduction. The median response was for a 100-point cut.

The central bank’s last two rate cuts were a bit more aggressive than expected, raising prospects of a course correction, said the four participants. Two said policymakers appeared ready to halt rate cuts if needed.

At an Atlantic Council event in Washington that was broadcast online last week, CBRT Governor Fatih Karahan said: “The downward trend has slowed down a little bit recently, which we are taking note of as important.”

Progress so far toward price stability is “very significant and encouraging,” Karahan said on the sidelines of the annual IMF and World Bank meetings in Washington, and he again pledged to keep policy tight until it is achieved.

During meetings in the U.S., the CBRT policymakers told foreign investors that they were increasingly concerned about inflation and suggested they were ready to slow down the pace of rate cuts, Reuters reported on Monday, citing four participants in the discussions.

The sources, all foreign investors holding Turkish bonds, attended some of a series of presentations by Karahan and his two deputies.

The investors said the policymakers gave no specific guidance about how much they could downshift their easing cycle this week.

But at the events, the central bankers said that they would closely watch market expectations ahead of their policy decision on Thursday, and that they aimed to address what one source called “sticky” inflation observed in recent months.

Earlier this month, Karahan acknowledged that data suggested the disinflation process is slowing, but stressed they remain committed to ensuring inflation stays in line with the interim targets.

The central bank estimates inflation will drop to about 24% by the end of the year, with a forecast range of 25%-29%. The government’s newly updated medium-term program expects it to slow to 28.5% this year.

The central bank made a shift in mid-2023 after years of low-rate policy. Since then, tighter monetary policy has helped restore reserves and draw foreign investors to Turkish assets.

In Washington, investors said there was some concern over the mandatory age-based retirement in April of CBRT Deputy Governor Cevdet Akçay, an influential hawk on the central bank’s policy committee. His successor has not yet been announced.

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