Turkish Central Bank cuts policy rate to 43% amid disinflation efforts

The Turkish Central Bank’s Monetary Policy Committee announced on Thursday a reduction in the one-week repo auction rate from 46% to 43%, signaling a cautious easing of its tight monetary stance.
The bank also lowered the overnight lending rate from 49% to 46% and the overnight borrowing rate from 44.5% to 41.5%, according to a statement released today.
The decision comes as the underlying trend of inflation remained stable in June, though leading indicators point to a temporary uptick in monthly inflation for July due to seasonal factors. The committee noted that disinflationary pressures from demand conditions have strengthened, but risks to the disinflation process persist, including inflation expectations, pricing behaviors, geopolitical developments, and rising global trade protectionism.
The bank emphasized its commitment to maintaining a tight monetary policy until price stability is achieved, aiming to support disinflation through moderated domestic demand, real appreciation of the Turkish lira, and improved inflation expectations. “Coordination of fiscal policy will contribute to this process,” the statement added. The committee will adjust the policy rate based on realized and expected inflation trends, ensuring the tightness aligns with the projected disinflation path. Future rate adjustments will be evaluated meeting-by-meeting, with a focus on the inflation outlook.
To address potential disruptions, the bank vowed to deploy additional macroprudential measures if unanticipated developments occur in credit and deposit markets. Liquidity conditions will be closely monitored, with liquidity management tools used effectively to support the monetary transmission mechanism.
The committee reiterated its goal of achieving a 5% inflation target in the medium term, promising decisions that are predictable, data-driven, and transparent. A detailed summary of the Monetary Policy Committee meeting will be released within five working days.
The rate cut reflects cautious optimism about Türkiye’s disinflation progress, though analysts note that persistent global and domestic challenges could complicate the path to price stability. (ILKHA)
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