Most central banks hold rates in March amid inflation concerns, while Türkiye moves to cut

As the global fight against inflation continues, most major central banks, including the U.S. Federal Reserve, kept their policy rates unchanged in March. However, the Central Bank of the Republic of Türkiye (CBRT) broke ranks with a third consecutive 250 basis-point interest rate cut, lowering the benchmark rate to 42.5%.

The decision came on Mar. 6, after Türkiye’s annual inflation in February was recorded at 39.05%, slightly better than market expectations.

In its official statement, the CBRT noted that the underlying trend of inflation had moderated in February following a significant rise in January. However, it also pointed out that domestic demand remained stronger than anticipated.

“Preliminary data suggests that this supportive outlook continued into the first quarter of the year,” the central bank said.

The Monetary Policy Committee (MPC) emphasized that while inflation expectations and pricing behavior have shown signs of improvement, they continue to pose risks to the disinflation process.

The CBRT stated that its firm monetary stance has helped support disinflation by encouraging a rebalancing of domestic demand, a real appreciation of the Turkish lira, and improvements in inflation expectations.

On the other hand, following a recent downturn in Turkish financial markets amid heightened political tensions, the central bank also raised the overnight lending rate—the rate at which banks borrow short-term funds—to 46% in an interim meeting held on Mar. 20.

This move is seen by analysts as a signal that monetary easing may be paused in the next meeting.

The next interest rate decision from the CBRT is scheduled for Thursday, April 17, 2025.

Fed holds, European Central Bank eases

In March, several central banks—including the Federal Reserve, the Bank of England (BoE), the Bank of Japan (BoJ), the Central Bank of Russia (CBR), and the central banks of the Czech Republic, Hungary, Poland, Sweden (Riksbank), and Norway—chose to hold their interest rates steady.

By contrast, the European Central Bank (ECB) implemented a 25 basis-point cut across its three key interest rates, bringing the main benchmark rate down to 2.50%. Similarly, the Bank of Canada (BoC) and the Swiss National Bank (SNB) also implemented 25 basis-point cuts.

Global economic uncertainty continues to dominate the agenda, driven by concerns over inflation, recession risks, and protectionist trade policies, particularly from the United States.

Economists warn that Washington’s increasingly protectionist stance could reinforce inflationary pressures and slow down global growth, influencing the decisions of other major economies.