FX.co ★ Turkey Cuts Rate by Less than Expected

In its initial 2026 meeting, the Central Bank of Turkey reduced its benchmark policy rate by one percentage point, bringing it down to 37%. This adjustment fell short of the median market forecast, which anticipated a 1.5 percentage point decrease, yet it nonetheless represents the lowest rate since November 2023. The central bank highlighted a softening in the underlying inflation trend by the end of last year, despite an uptick in the headline rate driven by rising food prices. This change justified a slight easing in stringent monetary conditions. However, policymakers emphasized the persistence of upside risks to inflation, citing unpredictable pricing behaviors and heightened inflation expectations, which continue to threaten the disinflation process.