Economy Turkey cuts interest rate by 250 basis points By Reuters January 23, 2025, 4:42 PM Unsplash+/Ahmet Kurt Turkey's central bank cut the interest rate in line with expectations and is predicted to continue Interest rate down to 45% 30% expected by year end Inflation falling Turkey’s central bank cut its key interest rate by 250 basis points to 45% as expected on Thursday, carrying on an easing cycle it launched last month alongside a decline in annual inflation that is expected to continue. The central bank indicated it would continue to ease policy in the months ahead, noting that it anticipated a rise in trend inflation in January, when economists expect a higher minimum wage to lift the monthly price readings. In a slight change to its guidance, the bank said it will maintain a tight stance “until price stability is achieved via a sustained decline in inflation”. Last month, it said it would be maintained until “a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range.” In a Reuters poll, all 13 respondents forecast a cut to 45% from 47.5% in the one-week repo rate. They expect it to hit 30% by year end, according to the poll median. In December, the central bank cut rates for the first time after 18-month tightening effort that reversed years of unorthodox economic policies and easy money championed by President Tayyip Erdoğan, who has since supported the steps. To tackle inflation that has soared for years, the bank had raised its policy rate by 4,150 basis points in total since mid-2023 and kept it at 50% for eight months before beginning easing. Annual inflation dipped to 44.38% last month in what the central bank believes is a sustained fall toward a 5% target over a few more years. It topped 75% in May last year. Turkey hit with tax on Syrian peace dividend Turkish house sales rise as interest rates fall Turkey to get $1bn from World Bank for quake recovery “While inflation expectations and pricing behaviour tend to improve, they continue to pose risks to the disinflation process,” the bank’s policy committee said after its rate decision. A 30% administered rise in the minimum wage for 2025 was lower than workers had requested, though it is expected to boost monthly inflation readings this month and next, economists say. The expected January inflation rise “is mainly driven by services items with time-dependent pricing and backward indexation,” the bank said. The central bank has eight monetary policy meetings set for this year, down from 12 last year.