Turkish central bank returns to easing, cuts key rate to 43%
The Turkish central bank lowered on Thursday its key policy rate by 300 basis points (bps) to 43%, slightly above the general market consensus, resuming an easing cycle as inflation in the country continued to ease in recent months.
The Central Bank of the Republic of Türkiye (CBRT) said the underlying trend of inflation 'remained flat in June,' with leading indicators suggesting 'a temporary rise in monthly inflation in July due to month-specific factors.' The bank has also reduced its overnight lending rate from 49% to 46% and the overnight borrowing rate from 44.5% to 41.5%, it said in a written statement following the Monetary Policy Committee (MPC) meeting.
Annual inflation was at 35.05% in June – down from 35.41% in May – and lowest since late 2021, according to official data. Inflation has dropped consistently from a peak of 75% in May last year.
'Recent data indicates that the disinflationary impact of demand conditions has strengthened,' the bank said.
Going forward, the central bank said it would determine the 'step size' of future monetary easing 'prudently' and on a meeting-to-meeting basis.
The cut, which markets read as 'sizeable,' came after the bank earlier in April raised its key interest rate to 46% due to market fluctuations following the arrest of Istanbul's mayor.
Most estimates, including those from financial institutions and polls, expected the central bank to cut rates by 250 basis points on Thursday, although they varied between 250 bps and 350 bps.
The lira currency remained stable after the decision at 40.48 to the dollar.
The bank also underlined that the potential impact of geopolitical developments and rising trade protectionism on the disinflation process 'are being closely monitored.' Repeating its statement from the previous meeting, it also again cited that inflation expectations and pricing behavior 'continue to pose risks to the disinflation process.' It also pledged that the tight monetary policy stance, 'will be maintained until price stability is achieved,' adding this would 'support the disinflation process.
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Turkish central bank returns to easing, cuts key rate to 43%
Agencies The Turkish central bank lowered on Thursday its key policy rate by 300 basis points (bps) to 43%, slightly above the general market consensus, resuming an easing cycle as inflation in the country continued to ease in recent months. The Central Bank of the Republic of Türkiye (CBRT) said the underlying trend of inflation 'remained flat in June,' with leading indicators suggesting 'a temporary rise in monthly inflation in July due to month-specific factors.' The bank has also reduced its overnight lending rate from 49% to 46% and the overnight borrowing rate from 44.5% to 41.5%, it said in a written statement following the Monetary Policy Committee (MPC) meeting. Annual inflation was at 35.05% in June – down from 35.41% in May – and lowest since late 2021, according to official data. Inflation has dropped consistently from a peak of 75% in May last year. 'Recent data indicates that the disinflationary impact of demand conditions has strengthened,' the bank said. Going forward, the central bank said it would determine the 'step size' of future monetary easing 'prudently' and on a meeting-to-meeting basis. The cut, which markets read as 'sizeable,' came after the bank earlier in April raised its key interest rate to 46% due to market fluctuations following the arrest of Istanbul's mayor. Most estimates, including those from financial institutions and polls, expected the central bank to cut rates by 250 basis points on Thursday, although they varied between 250 bps and 350 bps. The lira currency remained stable after the decision at 40.48 to the dollar. The bank also underlined that the potential impact of geopolitical developments and rising trade protectionism on the disinflation process 'are being closely monitored.' Repeating its statement from the previous meeting, it also again cited that inflation expectations and pricing behavior 'continue to pose risks to the disinflation process.' It also pledged that the tight monetary policy stance, 'will be maintained until price stability is achieved,' adding this would 'support the disinflation process.
