As widely expected, Türkiye’s Central Bank cut the policy rate (the one-week repo auction rate) from 39.5 percent to 38 percent.
The bank’s Monetary Policy Committee (MPC) met for the final rate-setting meeting of 2025 on Dec. 11.
The committee also lowered the Central Bank overnight lending rate from 42.5 percent to 41 percent and the overnight borrowing rate from 38 percent to 36.5 percent.
Most analysts had anticipated that the bank would continue its easing cycle this month, given the better‑than‑expected inflation data in November.
The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate and expectation channels, the bank said in a statement, accompanying the rate decision.
Monetary policy stance will be tightened in case of a significant deviation in inflation outlook from the interim targets, the bank reiterated.
Türkiye’s annual inflation rate fell to 31.07 percent in November, its lowest level in four years. On a monthly basis, consumer inflation dropped to 0.87 percent, marking a 30-month low.
“The committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets,” said the bank.
The committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5 percent inflation target in the medium term, the statement added.
The bank noted that, in November, consumer inflation was lower than expected due to a downward surprise in food prices.
Quarterly GDP growth turned out higher than projected in the third quarter, the statement highlighted, adding that leading indicators for the last quarter point out that demand conditions continue to support the disinflation process.
But it warned that while showing signs of improvement, inflation expectations and pricing behavior continue to pose risks to the disinflation process.
From May 2023 until March 2025, the bank raised the rate from 8.5 percent to 50 percent and then kept it constant until its MPC meeting in December 2024, when it lowered the rate 250 basis points to 47.5 percent.
The bank cut the benchmark rate at its December, January and March meetings from 50 percent to 42.5 percent. At its April meeting, in a surprise move, the bank raised the rate by 350 basis points to 46 percent, and left it unchanged at the June meeting, before slashing it by 300 basis points to 43 percent at the July meeting.
At its August meeting, the bank lowered the rate by 250 basis points to 40.5 percent, surpassing estimates, before cutting it again by 100 basis points to 39.5 percent in its previous meeting.
