Turkey’s central bank lowered its one-week repo rate by 100 basis points to 36% from 37%, and reduced its overnight lending and borrowing rates by the same margin, to 39% and 34.5%, respectively, in line with expectations. The Monetary Policy Committee noted that recent inflation readings and leading indicators continue to point to a downward trajectory, while economic activity indicates persistently weak domestic demand. At the same time, it flagged elevated energy prices, driven by ongoing geopolitical tensions, as a continuing source of upward pressure on inflation.
The bank reiterated its commitment to maintaining tight monetary conditions until price stability is secured, emphasizing that disinflation will be supported through the demand, exchange rate, and expectations channels. It stated that future interest rate decisions will be guided by inflation dynamics, inflation expectations, and progress toward interim targets, with any policy adjustments implemented in a cautious, meeting-by-meeting manner. The committee also warned that a significant and lasting deterioration in the inflation outlook could trigger additional monetary tightening.
