The Central Bank has lowered the policy interest rate from 50% to 47.5%.

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The Central Bank of the Republic of Turkey (CBRT) has reduced the policy interest rate by 250 basis points to 47.5%.

YEAR-END INTEREST RATE DECISION

In the Monetary Policy Committee (MPC) meeting held last month, the policy interest rate was kept stable at 50%.

In a statement made by the Central Bank, it was stated: "The Monetary Policy Committee (Committee) has decided to reduce the one-week repo auction interest rate, which is the policy interest rate, from 50% to 47.5%. The Committee has also decided to change the operational framework by determining the overnight borrowing and lending rates of the Central Bank with a margin of +/- 150 basis points compared to the one-week repo auction interest rate.

The main trend of inflation has remained close to flat in November. Leading indicators suggest a decline in the main trend in December. Indicators for the last quarter show that domestic demand continues to slow down, supporting the decline in inflation at sustainable levels. While core goods inflation continues to remain low, the improvement in service inflation is becoming more pronounced. Unprocessed food inflation appears moderate in December after the high levels of the previous two months. Although inflation expectations and pricing behaviors show a tendency to improve, they continue to pose a risk factor in terms of the disinflation process.

"TIGHT MONETARY POLICY WILL CONTINUE"

The determined stance in monetary policy is reducing the main trend of monthly inflation and strengthening the disinflation process through balancing domestic demand, real appreciation of the Turkish lira, and improvement in inflation expectations. The increasing coordination of fiscal policy will also make significant contributions to this process. The tight monetary policy stance will be maintained until a clear and permanent decline is achieved in the main trend of monthly inflation and inflation expectations converge to the projected forecast range. In this regard, the level of the policy interest rate will be determined in a way that provides the necessary tightness required by the anticipated disinflation process, taking into account inflation realizations and expectations. The Committee will make its decisions with a focus on the inflation outlook, a cautious approach, and a meeting-based strategy. If a significant and permanent deterioration in inflation is anticipated, monetary policy tools will be used effectively.

"MEDIUM-TERM INFLATION TARGET IS 5%"

If developments outside the anticipated occur in the credit and deposit markets, the monetary transmission mechanism will be supported by additional macroprudential steps. Liquidity conditions are being closely monitored in light of possible developments. Sterilization tools will continue to be used effectively.

The Committee will determine its policy decisions by considering the lagged effects of monetary tightening, in a way that will reduce the main trend of inflation and provide the monetary and financial conditions necessary to achieve the medium-term inflation target of 5%.

Indicators related to inflation and its main trend will be closely monitored, and the Committee will resolutely use all the tools at its disposal in line with its primary objective of price stability. The Committee will make its decisions within a predictable, data-driven, and transparent framework. The Summary of the Monetary Policy Committee Meeting will be published within five business days."

MARKET EXPECTATIONS WERE BETWEEN 47.50% AND 50%

The expectation survey for the Monetary Policy Committee (MPC) meeting was concluded with the participation of 14 economists. Among the economists participating in the expectation survey, 4 predicted that the policy interest rate would be kept stable, while 10 anticipated a decrease. The average expectation of the economists was for the interest rate to be reduced by 150 basis points to 48.50%.

According to the survey results, the economists' expectations for the policy interest rate ranged between 47.50% and 50.00%. The average expectation of economists for the end of 2025 policy interest rate was 29.50%.