Turkish central bank lowers key policy rate by 100 bps to 39.5%

The bank also lowered the overnight lending rate from 43.5 per cent to 42.5 per cent and the overnight borrowing rate from 39 per cent to 38 per cent.

The Turkish central bank has cut its benchmark, one-week repo rate by 100 bps to 39.5 per cent, citing a rise in inflation and a slowdown in disinflation process.
It also lowered the overnight lending rate from 43.5 per cent to 42.5 per cent and the overnight borrowing rate from 39 per cent to 38 per cent.
The stance will be tightened if the inflation outlook deviates significantly from interim targets.

“The underlying trend of inflation increased in September,” the bank said in its statement after its monetary policy committee (MPC) meeting.

“While recent data suggest that demand conditions are at disinflationary levels, they also point to a slowdown in the disinflation process,” it said.

“The risks posed by recent price developments, particularly in food, to the disinflation process through inflation expectations and pricing behavior have become more pronounced,” it added.

The bank’s policy stance will be tightened in case the inflation outlook deviates significantly from interim targets.

In August this year, the bank switched to a new system by introducing interim targets, separating them from its inflation forecast ranges in a new strategy aimed at boosting transparency and confidence. It set the inflation target for this year at 24 per cent, even though it is forecasting inflation of between 25 per cent and 29 per cent.

At its previous meeting in September, the bank made a 250-point cut in the face of higher-than-expected inflation and heightened political risk. A 300-point cut was made in the meeting before that in July.

Annual inflation rose slightly to 33.29 per cent in September, breaking a long declining trend observed since the middle of 2024 and triggering predictions of a slowdown in the monetary easing cycle.

Fibre2Fashion News Desk (DS)