Turkish central bank slashes policy rate, extending interest cut cycle for 3rd meeting

The Central Bank of the Republic of Türkiye (CBRT) cut the policy interest rate by 250 basis points, as annual inflation figures signalled better-than-expected momentum, allowing for an easing of monetary tightness.

The benchmark one-week repo rate was lowered to 42.5% from 45%.

The Turkish central bank announced its decision on Thursday following the second Monetary Policy Meeting of the year, citing February’s inflation figures, which eased for the ninth consecutive month to 39.05% and marked the lowest annual rate since June 2023.

Emphasizing that inflation in both goods and services had slowed, CBRT stated: “While inflation expectations and pricing behavior show signs of improvement, they remain a risk to the disinflation process.”

Tight monetary policy continues

Reiterating that its tight monetary policy would remain in place until price stability is achieved through a sustained reduction in inflation, the bank stressed that it would make cautious decisions on a meeting-by-meeting basis, with a primary focus on the inflation outlook.

“Monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen,” it added.

Türkiye’s annual inflation rate in January eased for the ninth consecutive month to 39.05%, the lowest reading since June 2023.

From May 2023 until last March, the bank raised the rate from 8.5% to 50% and then kept it constant until its December meeting, when it lowered the rate by 250 basis points to 47.5%.