December ‘still early’ for interest rate cuts, TEPAV advises Turkish central bank

The Economic Policy Research Foundation of Türkiye (TEPAV) assessed the potential consequences of a December interest rate cut, cautioning the Central Bank of the Republic of Türkiye (CBRT) that initiating monetary easing now would be premature.

TEPAV published the 16th edition of its Monetary Policy Assessment Note on Tuesday, offering crucial analyses and evaluations of Türkiye’s monetary policies and economic conditions. TEPAV remarked that annual inflation in Türkiye exceeded the G20 average, highlighting several structural and policy challenges impacting the economy.

The report emphasizes the need for coordinated fiscal and monetary policies to address inflationary pressures and ensure financial stability, as key insights listed below:

• Macroprudential restrictions have elevated loan interest rates, complicating inflation control efforts and requiring review.
• Persistent budget deficits require additional measures to meet the 2025 Medium-Term Program targets.
• Sharp price hikes in public goods have increased production costs, intensifying inflationary pressures.
• Monetary policy alone, without structural reforms, raises concerns about economic sustainability.
• A comprehensive development strategy is urgently needed to address inflation and support stable economic growth.
• Fiscal reforms, including improved tax policies and tackling the informal economy, are essential to complement monetary efforts.
• Strengthening institutions and enhancing productivity are vital for achieving long-term economic stability.

The report concludes that a fully rationalized economic framework depends on the timely implementation of these measures, with coordinated fiscal and monetary actions critical to achieving stability and growth.

The CBRT will announce its policy rate decision for December Thursday, following the Monetary Policy Committee meeting at 2 p.m. (GMT+3).