LONDON, Aug 3 (Reuters) – JPMorgan pushed back and downgraded its interest rate cut forecast for Turkey on Tuesday, as fellow investment bank Goldman Sachs flagged the risk of lower rate cuts and later after inflation hit its highest level in two years last month.

Turkey’s annual inflation hit 18.95% in July, official data showed on Tuesday, above a poll forecast of 18.5% and just below the current main interest rate of 19% the central bank. (TRINT=ECI)

The weak Turkish lira and the loss of monetary credibility following the ousting of hawkish central bank governor Naci Agbal in March have pushed up inflation in recent months.

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After the July reading, JPMorgan, which had previously forecast three 50 basis point (bp) cuts in October, November and December respectively, switched to forecasting two 50 basis point cuts in the last two months of the month. year, said JPMorgan economist Yarkin Cebeci. in a research note.

“We see the policy rate at 15.0% (up from the previous forecast of 14.5%) at the end of 2022, but as always a series of factors – macroeconomic and political in nature – are creating uncertainties. important,” the note reads.

Goldman Sachs said it continued to believe the central bank would not have a chance to cut rates until the fourth quarter and the risks were for later and smaller-than-expected cuts.

Scope Ratings also downgraded its forecast for interest rate cuts, saying stubbornly high inflation was likely to limit the decline to 17%, from 16%, by the end of the year. .

“Rate cuts are clearly ruled out in Turkey until the fall or even winter at the earliest,” said Scope’s director of sovereign and public sector ratings, Dennis Shen.

“Previously, we expected premature rate cuts to start in late summer due to political pressure,” Shen added.

Citi said the tougher inflation outlook is a strong argument against monetary easing this year.

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Reporting by Marc Jones and Tom Arnold Editing by Mark Potter

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