The Turkish Central Bank announced on Thursday after a meeting of its Monetary Policy Committee a cut of its interest rate by 300 basis points – even above economists’ forecasts – to 43%, following the positive development of inflation, which stood at 35% in June.
As reported in the Turkish media in recent hours, the benchmark one-week repo rate was cut by 300 basis points from 46% to 43%, although most analysts had expected the Central Bank of the Republic of Turkey (TCMB) to reduce it by no more than 250 basis points. The bank also cut the overnight lending rate from 49% to 46%, while the overnight borrowing rate was cut from 44.5% to 41.5%.
Following the Monetary Policy Committee meeting on 24 July, the TCMB issued a statement explaining that the underlying trend of inflation remained stable during June, although leading indicators point to a slight temporary increase in monthly inflation in July due to seasonal factors.
“Recent data indicate that the disinflationary impact of demand conditions has strengthened,” the central bank said, assuring that it is closely monitoring the potential impact of geopolitical developments and the tariff war on the disinflation process in Turkey, and insisting once again that it will maintain a tight monetary policy until price stability is achieved, through moderation in domestic demand and real appreciation in Turkish Lira.
The Turkish Central Bank began its policy of interest rate cuts last December as inflation began to gradually decline in Turkey, after having exceeded 75%. After cutting rates from 50% to 42.5%, however, in April it announced a surprise 350 basis point hike to 46%, which it kept unchanged in June. The next meetings of the Monetary Policy Committee are scheduled for 11 September, 23 October and 11 December.
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Edited and reviewed by:
Pablo Gómez is a specialist in Turkey and has been editor-in-chief of Hispanatolia since 2011. He has been analysing current affairs and geopolitics in Turkey and the surrounding region since 2006.
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