Banking & Finance Turkish inflation eases again, with interest rate cut likely By William Sellars March 4, 2025, 11:42 AM Alamy via Reuters Workers using steam turbines in a factory. Turkey's manufacturing sector improved in February Turkey inflation below 40% Central bank to consider interest rate cut PMI climbed to 48.3 points Turkey’s inflation rate declined again in February, falling below 40 percent for the first time since mid-2023, while an indicator of industrial activity improved. The consumer price index fell to 39.05 percent, according to data issued by state statistics agency Turkstat this week, with a month-on-month price increase of 2.27 percent. The decline could mean another reduction in the central bank’s key policy interest rate as soon as this Thursday, when its monetary policy committee meets, economist Mustafa Sönmez said. “Market expectations were for a more than 3 percent increase in monthly inflation,” Sönmez said. “What these results mean, with annual inflation coming just under 40 percent, is a strengthening of the central bank’s hand to cut interest rates.” The central bank reduced its key rate by 2.5 percent at each of its last two monetary policy meetings, the combined cuts taking its overnight lending rate to 45 percent. However, the bank remains wary of inflationary pressures, with governor Fatih Karahan announcing in mid-February an upward revision in its forecast for 2025 from 21 to 24 percent. Turkey’s wholesale inflation also fell in February, with the producer price index dropping from January’s 27.2 percent to 25.21, with a monthly increase of 2.12 percent. The decline also coincided with an improvement in the operating environment for Turkey’s manufacturing sector. High costs push up Turkish inflation in January Turkey’s inflation falls to lowest in 18 months Turkey plans ‘landmark’ rate cuts in 2025 says Erdoğan The latest Istanbul Chamber of Industry’s purchasing managers index, also released this week, climbed to 48.3 points in February, up on the previous month’s 48 but still short of the 50 points that indicates no change in business prospects. New orders in manufacturing declined for the 20th month in a row though, partly due to input costs, which in turn resulted in a fall in output and in staffing numbers. However, the rate of decline slowed, potentially indicating a bottoming out and possible turnaround later in the year.
