Central Bank delivers another 250 bps interest rate cut
ANKARA

As widely expected, the Turkish Central Bank slashed its policy rate — the one-week repo auction rate — by 250 basis points to 45 percent.
The bank started the easing cycle in December 2024 by cutting the key rate from 50 percent to 47.5 percent that marked the first cut in nearly two years.
The decisiveness regarding tight monetary stance is strengthening the disinflation process through moderation in domestic demand, real appreciation in Turkish Lira, and improvement in inflation expectations, said the bank in a statement released after this year’s first Monetary Policy Committee meeting on Jan. 23.
Going forward, increased coordination of fiscal policy will also contribute significantly to this process, the bank added.
Türkiye's annual inflation rate slowed for the seventh consecutive month in December 2024.
Consumer prices rose by 44.38 percent last month, down from 47.1 percent in November.
While the underlying trend of inflation decreased in December, leading indicators point to an increase in January, in line with the projections, according to the bank.
This increase is mainly driven by services items with time-dependent pricing and backward indexation, it explained.
Consumer prices advanced 1.03 in December monthly, after rising 2.24 percent in November.
Core goods inflation, however, remains relatively low, said the bank, noting that indicators for the last quarter suggest that domestic demand stands at disinflationary levels.
While inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process, it warned.
The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation, the Central Bank reiterated in the statement.
The policy rate will be determined in a way to ensure the tightness required by the projected disinflation path taking into account realized and expected inflation, and the underlying trend, according to the bank.
The committee will make its decisions prudently on a meeting-by-meeting basis with a focus on the inflation outlook, it said.
The bank’s Monetary Policy Committee will convene eight times this year, with the next rate-setting meeting scheduled for March 6.
Monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen, the bank said.
In case of unanticipated developments in credit and deposit markets, monetary transmission mechanism will be supported via additional macroprudential measures, it added.
Taking into account the lagged effects of monetary tightening, the committee will make its policy decisions so as to create the monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term.