Turkey Interest Rate

The Central Bank of Turkey cut its benchmark one-week repo auction rate by 250bps to 47.5% in its December 2024 decision, ending the nine-month stretch of borrowing costs at a 14-year high, to mark its first rate cut since a series of unorthodox rate cuts bottomed at 8.5% in February 2023 despite a plunging lira and soaring inflation at the time. This contrasted with the median market expectation of a 150bps cut. In turn, the TCMB narrowed the overnight rate corridor between the lending and borrowing rates to maintain policy restrictive. The Monetary Policy Committee noted that leading indicators suggested that disinflation has continued through the end of the year amid a more apparent moderation in services inflation. The latest data showed that headline inflation slowed to a 17-month low of 47.09%, but the recent rate of decline has eased. Importantly, the central bank also stated that increased coordination with fiscal policy will be done to transmit a restrictive monetary backdrop.