Economy Turkey’s central bank cuts interest rates again By William Sellars March 6, 2025, 4:33 PM Alamy via Reuters People at a currency exchange in Izmir, Turkey. The Turkish government has a 2026 inflation target of 12 percent 250 basis points reduction Inflation fell in February Further cuts anticipated Turkey’s central bank has cut interest rates for the third time since December, citing an easing of inflationary pressures and a cooling of domestic demand as factors in its decision. The bank’s monetary policy committee cut its headline lending rate by 250 basis points on March 6, lowering its interest rate to 42.5 percent from the previous level of 45 percent, set on January 23. A cut in the bank’s key lending rate was widely anticipated after better than expected inflation numbers for February. Turkey’s consumer price index fell to 39 percent in the second month of the year, its lowest level since mid-2023 and down from January’s 42 percent. In a statement announcing the cut, the bank said leading indicators suggested that domestic demand continued to be disinflationary in the first quarter, maintaining a trend from the last months of 2024. However, the bank also sounded a note of caution, saying, “While inflation expectations and pricing behaviour tend to improve, they continue to pose risks to the disinflation process.” Ayhan Zeytinoğlu, the head of the Istanbul-based Economic Development Foundation (IKV), viewed the central bank move as positive but said further reductions will be needed before the impact of lower borrowing costs will be felt. “Having the interest rate lowered is good but it is not yet at a level to make investments appealing,” Zeytinoğlu, who is also board chairman of the Kocaeli Chamber of Industry, said. “However, the latest cut can be seen as lighting a torch, an indicator, it is a good sign.” Turkey’s economic rebound softened by soaring imports Confidence builds in Turkish real economy Jewellery crowns Turkish exports in January A better indicator will be where interest rates stand in the middle of the year, he said, with a continued fall in inflation likely to feed into further reductions. “Due to the base effect, in May or June there will be improvements in inflation,” he said. “We hope that, in line with the central bank’s estimations, we will close the year with inflation within the band of 25 to 26 percent.” In February, the central bank raised its year-end inflation forecast from 21 to 24 percent, while maintaining its 2026 inflation target of 12 percent.
