The central bank kept the interest rate unchanged.

19.06.2025 14:11

The Monetary Policy Committee of the Central Bank of the Republic of Turkey kept the policy interest rate, which is the one-week repo auction rate, unchanged at 46%. In the statement made after the MPC meeting, it was emphasized that "The possible effects of geopolitical developments and increasing protectionism in global trade on the disinflation process are being closely monitored."

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The Central Bank announced the interest rate decision that the markets have been eagerly awaiting. Starting with a rate cut in December 2024, the Central Bank continued this in January and February, reducing the interest rate from 50% to 42.50% over a three-month period. However, after the excessive volatility in exchange rates in April, the Central Bank took a surprising step by raising the interest rate by 350 basis points to 46%. Today, the Central Bank, which announced the fourth interest rate decision of 2025, did not surprise the markets.

NO SURPRISE IN JUNE

According to the statement made after the TCMB Monetary Policy Committee (MPC) meeting, the weekly repo rate remained at 46.00%. The Central Bank's statement is as follows: "The Monetary Policy Committee (Committee) has decided to keep the one-week repo auction interest rate, which is the policy rate, at 46%. The Committee also kept the overnight lending rate at 49% and the overnight borrowing rate at 44.5%."

"IT INDICATES THAT DOMESTIC DEMAND HAS SLOWED DOWN"

The main trend of inflation decreased in May. Leading indicators suggest that the decline in the main trend continued in June. Data for the second quarter shows that domestic demand has slowed down. The possible effects of geopolitical developments and increasing protectionism in global trade on the disinflation process are being closely monitored. Inflation expectations and pricing behaviors continue to pose a risk factor for the disinflation process.

"ALL MONETARY POLICY TOOLS WILL BE USED EFFECTIVELY"

The determined stance in monetary policy strengthens 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. A tight monetary policy stance will be maintained until a permanent decrease in inflation and price stability is achieved. In this regard, 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, the main trend, and expectations. The Committee will determine the steps to be taken regarding the policy interest rate 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, all monetary policy tools will be used effectively.

"MEETING SUMMARY WILL BE PUBLISHED WITHIN 5 BUSINESS DAYS"

If there are developments in the credit and deposit markets that are outside expectations, the monetary transmission mechanism will be supported by additional macroprudential steps. Liquidity conditions will continue to be closely monitored, and liquidity management tools will be used effectively. The Committee will determine its policy decisions by considering the delayed effects of monetary tightening, in a way that will reduce the main trend of inflation and provide the monetary and financial conditions that will bring inflation to the medium-term target of 5%. In this regard, all monetary policy tools will be used decisively. The Committee will make its decisions within a predictable, data-driven, and transparent framework. The Monetary Policy Committee Meeting Summary will be published within five business days."