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Economic growth

Turkish Central Bank Cuts Policy Rate by 250 Basis Points

Strategic Insights

— 1 min read

The Turkish Central Bank surprised markets by cutting its policy rate by 250 basis points, lowering the benchmark one-week repo rate from 43% to 40.5%. This move was more aggressive than the expected 200 basis point rate cut. The decision came as the bank noted that the underlying trend of inflation slowed in August, with the annual inflation rate easing for the 15th consecutive month to 32.95% in August, its lowest reading since November 2021.

Key Takeaways:

  • The Turkish Central Bank lowered its policy rate by 250 basis points, more than markets expected.
  • The benchmark one-week repo rate was lowered from 43% to 40.5%.
  • The bank cited easing inflation and a slowdown in the underlying trend of inflation in August as reasons for the rate cut.
  • The bank maintained its tight monetary policy stance to achieve price stability and strengthen the disinflation process.
  • The macroeconomic framework outlined in the Medium-Term Program will contribute to the disinflation process.
  • Trkiye's annual inflation rate in August eased for the 15th consecutive month to 32.95%, its lowest reading since November 2021.
  • The bank raised the rate to 46% in April and left it unchanged at the June meeting, but cut the rate by 300 basis points to 43% at the previous meeting.
  • The bank's rate cuts over the past months include a 250 basis point cut to 47.5% in December, followed by a 300 basis point cut to 42.5% in January and March.

Statistics:

  • The policy rate was cut by 250 basis points to 40.5%.
  • The benchmark one-week repo rate was lowered from 43% to 40.5%.
  • Trkiye's annual inflation rate in August eased to 32.95%, its lowest reading since November 2021.
  • The bank had raised the rate from 8.5% to 50% from May 2023 until last March.
  • The bank cut the benchmark rate at its December, January, and March meetings from 50% to 42.5%.
  • At the April meeting, the bank raised the rate 350 basis points to 46%.

Sources:

  • Turkish Central Bank press release, no specific date mentioned in the original text.
  • CNBH, no specific date mentioned in the original text.

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