MNI CBRT WATCH: Turkey Central Bank Cuts 100 Basis Points

The Central Bank of Turkey delivered a mildly hawkish surprise on Thursday, as it cut key interest rates by 100 basis points, rather than the 150bp seen by a majority of analysts, though the move was still within the range of expectations. (See MNI CBRT WATCH: 150Bps Cut Expected As Progress Continues)

The one-week repo rate was lowered to 37%, with the overnight lending and borrowing rates falling to 40% and 35.5%, respectively, as the Monetary Policy Committee reaffirmed its commitment to maintaining a tight monetary policy stance until price stability is achieved. 

“The underlying trend of inflation declined in December. While leading indicators suggest that monthly consumer inflation has firmed in January, led by food prices, the rise in the underlying trend of inflation is limited,” a statement said.

December’s inflation was 30.9%,

“Indicators for the last quarter point to demand conditions that continue to support the disinflation process, albeit at a moderating pace. While showing signs of improvement, inflation expectations and pricing behaviour continue to pose risks to the disinflation process.”

Speaking to MNI before the meeting, former CBRT deputy governor Ibrahim Turhan said the bank could afford to cut by 150bp in January despite markets seeing monthly inflation at around 4%. Cuts of 100-150bp are likely at each policy meeting this year, “even if there is some volatility in January and February’s monthly inflation readings,” he added. (See MNI EM INTERVIEW: CBRT Hard Work To Start In 2027 - Ex-DG Turhan)