Turkey’s Central Bank Cuts Interest Rate by 100 Basis-point to 37%

Turkey’s central bank on Thursday lowered its benchmark interest rate by 100 basis points to 37%, citing a continued slowdown in annual inflation, in a move that signals cautious confidence in the disinflation trend despite lingering economic pressures.

In a statement following a meeting of its Monetary Policy Committee, the Central Bank of the Republic of Turkey said it had decided to cut the one-week repo rate from 38% to 37%, as headline inflation shows signs of sustained moderation.

According to official data, annual inflation slowed to 30.9% in December 2025, marking the fourth consecutive monthly decline and a sharp drop from 44.4% recorded a year earlier. The bank noted that the general inflation trend eased in December, adding that early indicators for January suggest relative stability in monthly consumer inflation, largely driven by food prices.

While the central bank acknowledged a slight uptick in underlying inflation dynamics, it said the increase in the core trend “remained limited,” providing room for a measured policy adjustment.

Despite the official optimism, inflation data remains contested. The independent Inflation Research Group (ENAG) challenged the government figures, estimating annual inflation at 56.14% in December, nearly double the official reading. ENAG’s assessments are closely watched by investors and analysts who question the accuracy of state-reported data.

Turkey’s economy continues to face dual pressures from high inflation and declining foreign exchange reserves. In recent months, the central bank has drawn on reserves to stabilize markets and support the lira, while fluctuations in global gold prices have also affected the overall value of reserves.