Turkey’s Central Bank Cuts Policy Rate to 42.5% Amid Inflation Control Efforts

The Central Bank of the Republic of Turkey reduced its policy rate by 250 basis points on Thursday, bringing it down from 45% to 42.5%, in line with market expectations. This move comes as the bank maintains a firm stance on monetary policy until sustained price stability is achieved.

In a statement, the bank emphasized that the policy rate would continue to be adjusted to ensure the tightness required for disinflation, taking into account both realized and expected inflation. It also reaffirmed a cautious, meeting-by-meeting approach, with a primary focus on inflation trends. Additionally, it signaled readiness to use monetary policy tools effectively if any significant deterioration in inflation is foreseen.

Turkey’s annual inflation rate eased to 39.05% in January, marking the ninth consecutive month of decline and the lowest level since June 2023. The central bank had previously raised interest rates from 8.5% to 50% between May 2023 and March 2024, before beginning a gradual reduction in December.