Turkey’s Central Bank lowers interest rates for the first time in nearly 2 years
The decision to cut interest rates follows 18 months of monetary tightening and comes amid ongoing efforts to stabilize the country’s runaway inflation.
ANKARA — Turkey’s Central Bank on Thursday lowered its interest rates by 250 basis points, from 50% to 47.5%, easing the monetary tightening policy of the past 18 months.
“The decisiveness regarding the tight monetary stance is bringing down the underlying trend of monthly inflation and strengthening the disinflation process through moderation in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations,” the Monetary Policy Committee said in a statement after its meeting.
“The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed,” the committee said.
Economists had widely expected the Central Bank to lower the rates, according to a Reuters poll published last week.
The Turkish lira slightly tumbled against the dollar following the move, with the lira trading at 35.21 against the dollar as of mid-afternoon Istanbul time on Thursday.
The move marks a first since February 2023 when the Central Bank lowered its benchmark rates from 9% to 8.5%. The move was part of Turkish President Recep Tayyip Erdogan’s unorthodox economic policy at the time, relying on keeping interest rates low to prompt economic growth despite breakneck inflation, which peaked at an all-time high of 85% in 2022.
Following the May 2023 presidential and parliamentary elections, Erdogan shifted to orthodox economic policies. The country’s Central Bank raised its interest rates from 8.5% to 50% in an aggressive run of hikes between June 2023 and March 2024. The bank had been holding the rates steady at 50% since April.
Turkey's annual inflation has started to decline since the launch of the monetary tightening policy. In November, year-on-year inflation stood at 49.9%, while month-on-month inflation increased by 2.2%, according to data released by the Turkish Statistical Institute in early December.
The rate cut came a day after the Turkish government hiked the country's minimum wage by 30% to 22,104 Turkish liras ($630) for the year 2025.
The minimum wage hike fell way short of the nearly 70% demanded by the workers union. The 2025 figure is just slightly above the hunger threshold, the monthly cost of a healthy diet. For a family of four based in Ankara, that is roughly 20,562 liras, or some $585, according to November figures from TURK-IS, the country’s largest workers union confederation.
