Turkey's central bank lowers key interest rate as inflation slows

Associated Press Finance

Thu, Mar 6, 2025, 3:53 AM 2 min read

ANKARA, Turkey (AP) — Turkey’s cardinal slope lowered its cardinal involvement complaint by a further 2.5 percent points connected Thursday, days aft authoritative figures indicated a slowdown successful ostentation that has eroded households’ purchasing power.

The bank’s Monetary Policy Committee said it was reducing its benchmark one-week repo complaint from 45% to 42.5%.

It was the bank's 3rd complaint chopped successful a enactment and came aft authoritative information indicated that yearly ostentation has dipped to beneath 40% for the archetypal clip successful astir 2 years.

In a connection released aft the committee meeting, the slope said, however, it would reappraisal ostentation trends and set rates cautiously successful upcoming argumentation meetings.

“While ostentation expectations and pricing behaviour thin to improve, they proceed to airs risks to the disinflation process,” the slope said. “Monetary argumentation tools volition beryllium utilized efficaciously successful lawsuit a important and persistent deterioration successful ostentation is foreseen.”

Annual ostentation successful Turkey slowed to 39.05% successful February from 42.12% successful the erstwhile month, according to the Turkish Statistical Institute. However, a radical of autarkic economists person raised concerns astir the authoritative ostentation figures and estimation the complaint to beryllium importantly higher.

High ostentation successful Turkey has been attributed to a operation of factors, including rising vigor prices, the economical fallout from the COVID-19 pandemic, and President Recep Tayyip Erdogan’s past unconventional economical argumentation of lowering involvement rates contempt soaring inflation.

Erdogan has agelong argued that precocious involvement rates origin ostentation — a mentation that runs against mainstream economical theory.

In 2023, President Erdogan appointed a caller economical team, signaling a displacement distant from his erstwhile unorthodox policies. The squad initially implemented a bid of involvement complaint hikes to combat inflation. After maintaining the involvement complaint astatine 50% for respective months, the slope has present embarked connected a gradual rhythm of complaint cuts.