Türkiye's central bank cuts key rate to 37%, cites inflation progress

The Central Bank of the Republic of Türkiye (CBRT) lowered its key policy rate by 100 basis points on Thursday, continuing a measured monetary easing cycle as officials pointed to ongoing progress in the fight against inflation. The one-week repo rate now stands at 37%, down from 38%.

A cautious move amid positive trends

The rate cut, which was slightly smaller than the reduction forecast in some market surveys, reflects the bank's cautious approach. In its accompanying statement, the Monetary Policy Committee acknowledged that leading indicators point to a rise in monthly consumer inflation for January, primarily driven by food prices. However, it emphasized that the underlying trend of inflation, excluding volatile components, continued to decline in December. The bank noted that domestic demand conditions "continue to support the disinflation process, albeit at a moderating pace."

Commitment to restrictive stance and medium-term target

Despite the easing cycle, the CBRT firmly reiterated its commitment to a "restrictive monetary policy stance" until its primary goal of price stability is achieved. It stated this stance would continue to support disinflation by influencing demand, exchange rates, and inflation expectations. The committee vowed to set future policy rates by considering actual and expected inflation alongside underlying trends, aiming for "predictable, data-driven and transparent" decisions. The ultimate goal, the statement said, is to "create the monetary and financial conditions necessary to reach the 5% inflation target in the medium term."

Context of a sustained disinflation path

The latest cut is part of a series of gradual reductions that began in December 2024, following a prolonged period of aggressive rate hikes. From a peak of 50% in March 2025, the bank has now lowered the policy rate by a cumulative 13 percentage points. This shift in policy has been supported by a significant cooling of annual inflation, which fell to 30.89% in December—a 49-month low. The central bank's actions signal confidence that its stringent measures have anchored inflation expectations and set the economy on a sustainable path toward lower price growth, a critical development for national economic stability and investor confidence.