Disinflation

The Turkish Central Bank has lowered its key interest rate by 250 basis points to 47.5 percent, delivering the first cut in nearly two years.

Most economists had expected the bank to reduce the key rate, the one-week repo auction rate, by 150 basis points.

The last cut was in February 2023.

The Turkish economy still has a growth potential and may join high-income countries within a year or two, Finance Minister Mehmet Şimşek has said, adding that disinflation has begun and is continuing.

"We are converging to European Union countries in terms of per capita income," the minister said, speaking at an energy conference in Istanbul.

Türkiye's economy grew by 2.1 percent in the third quarter of 2024, according to data released by the Turkish Statistical Institute (TÜİK) on Nov. 29.

While the growth reflects moderate progress, it aligns with projections made during the country's ongoing disinflation policies.

The Central Bank of Türkiye targets to lower its policy interest rate to 21 percent by the end of 2025, the bank's governor has said.

Speaking at the Istanbul Chamber of Industry (ISO), Fatih Karahan said on Nov. 27 projections related to the underlying trend of inflation improved, albeit slower than anticipated.

As widely expected, the Turkish Central Bank has kept the key interest rate, the one-week repo auction rate, on hold for an eighth straight month at 50 percent.

While inflation expectations and price behavior tend to improve, they continue to pose risks to the disinflation process, the bank said in a statement released after the Monetary Policy Committee meeting on Nov. 21.

The annual inflation rate further slowed from 49.38 percent in September to 48.58 percent in October, the lowest rate since July 2023, according to data from the Turkish Statistical Institute (TÜİK) on Nov. 4.

Consumer prices advanced 2.88 percent last month, easing from 2.97 percent in September.

As widely expected, Türkiye's Central Bank has extended its interest-rate pause for a seventh straight month.

The bank will keep the policy rate, the one-week repo auction rate, unchanged at 50 percent.

The policy turnaround has reduced Türkiye's economic imbalances and revived confidence, the International Monetary Fund (IMF) has said.

Headline inflation has fallen as tighter financial conditions are weighing on domestic demand, it noted in a statement on Article IV consultation.

Türkiye is in a period of reducing uncertainties to a minimum, Vice President Cevdet Yılmaz has stated, stressing that the country continues to ensure predictability, sustainability and confidence.

The decline in annual inflation continued for a fourth month in a row, easing from 51.97 percent in August to 49.38 percent in September, data from the Turkish Statistical Institute (TÜİK) showed on Oct. 3.

This marked the lowest annual inflation rate since July 2023.

Consumer prices advanced 2.97 percent month-on-month after rising 2.47 percent in August.