Central Bank cuts policy rate by 300 bps to 43 percent
ANKARA
The Central Bank has slashed its policy rate by 300 basis points to 43 percent, resuming an easing cycle.
The benchmark one-week repo rate was lowered from 46 percent to 43 percent. Most economists had expected the bank to deliver a 250-basis point reduction in the policy rate.
The bank also cut its overnight lending rate from 49 percent to 46 percent and the overnight borrowing rate from 44.5 percent to 41.5 percent.
The bank said in a statement released after the Monetary Policy Committee (MPC) meeting on July 24 that 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.
"Recent data indicate that the disinflationary impact of demand conditions has strengthened," it added.
The bank also underlined that the potential impact of geopolitical developments and rising trade protectionism on the disinflation process is being closely monitored.
Türkiye's annual inflation rate in June eased for the 13th consecutive month to 35.05 percent.
From May 2023 until last March, the bank raised the rate from 8.5 percent to 50 percent and then kept it constant until its meeting last December, when it lowered the rate 250 basis points to 47.5 percent.
The tight monetary policy stance, which will be maintained until price stability is achieved, will support the disinflation process through moderation in domestic demand, real appreciation in Turkish Lira, and improvement in inflation expectations, the bank said on July 24.
“Going forward, coordination of fiscal policy will contribute to this process. The committee will determine the policy rate by taking into account realized and expected inflation, and its underlying trend in a way to ensure the tightness required by the projected disinflation path,” it added.
But it warned that inflation expectations and pricing behavior continue to pose risks to the disinflation process.
The bank cut the benchmark rate at its December, January and March meetings from 50 percent to 42.5 percent. At the April meeting, in a surprise move, the bank raised the rate 350 basis points to 46 percent, before leaving it unchanged at the June meeting.
The next MPC meetings are scheduled for Sept. 11, Oct. 23 and Dec. 11.
