Turkish Central Bank Cuts Policy Rate by 150 Bps to 38 Percent

“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.