Turkey's Central Bank Cut Interest Rates by 250 Basis-point to 47.5%

The Central Bank of Turkey cut interest rates for the first time in nearly two years at its meeting on Thursday by 250 basis points, bringing the interest rate to 47.5%.

The last interest rate cut by the Turkish Central Bank was in February 2023.

The bank attributed the decision to cut interest rates in its statement to the decline in inflation in November with expectations of a slowdown in December as well.

Inflation in November recorded about 47.09% compared to 48.58% in October, according to the Turkish Statistical Authority.

It added that while inflation expectations and pricing behavior tend to improve, they still pose risks to the inflation reduction process.

However, despite expectations of a slowdown in inflation, the bank says that the tight monetary stance will be maintained until a significant and sustainable decline in the basic trend of monthly inflation is observed and inflation expectations converge with the expected forecast range. 

The bank aims to reach an inflation rate of 5% in the medium term.

The Turkish central bank cut interest rates in line with economists’ expectations, according to a Reuters poll last week, with economists expecting the first rate cut to be between 150 and 250 basis points from the policy rate, which had been around 50%.

To continue to curb inflation next year, the Turkish government raised the net monthly minimum wage in Turkey by 30% to $627 in 2025, saying the level was set to maintain fiscal discipline and continue to combat inflation.