Türkiye Cuts Policy Rate to 38 Percent

(MENAFN) Türkiye's Central Bank executed a 150-basis-point reduction to its benchmark policy rate Thursday, delivering an outcome precisely aligned with analyst predictions.

The one-week repo rate—the institution's primary monetary policy instrument—declined from 39.5% to 38%, conforming to projections gathered through an Anadolu survey of financial markets.

Monetary authorities attributed the adjustment to November's consumer inflation figures, which underperformed expectations driven by unexpected declines in food commodity prices. While inflation registered an uptick in September, its fundamental trajectory exhibited modest downward movement through October and November.

"Quarterly GDP growth turned out higher than projected in the third quarter," the Central Bank declared in its official statement, noting that preliminary economic indicators for the fourth quarter suggest demand dynamics remain supportive of the disinflationary trajectory.

"While showing signs of improvement, inflation expectations and pricing behavior continue to pose risks to the disinflation process," monetary policymakers acknowledged.

"The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels," the institution emphasized.

Bank officials stressed their commitment to maintaining monetary stringency consistent with the forecasted inflation reduction pathway, calibrating the policy rate based on both actual and anticipated price movements alongside underlying inflationary trends relative to interim benchmarks.

"The (Monetary Policy) Committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5% inflation target in the medium term," the statement concluded.

Inflation trajectory and recent policy shifts
Türkiye's annual inflation metric dropped to 31.07% in November—a four-year low—from October's 32.87% reading, falling beneath market consensus forecasts.

Between May 2023 and March 2025, the central banking authority implemented aggressive tightening, elevating the rate from 8.5% to 50%, subsequently maintaining that elevated level through the December 2024 Monetary Policy Committee gathering, when officials initiated cuts with a 250-basis-point reduction to 47.5%.

Monetary authorities trimmed the benchmark rate during December, January, and March sessions from 50% to 42.5%. April's meeting delivered an unexpected reversal—a 350-basis-point hike to 46%—followed by no adjustment in June before a 300-basis-point slash to 43% materialized in July.

August witnessed a 250-basis-point decrease to 40.5%, exceeding forecaster estimates, while the preceding meeting delivered an additional 100-basis-point cut to 39.5%.

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