Türkiye’s central bank is widely anticipated to cut its key interest rate by 250 basis points in its upcoming monetary policy meeting, potentially lowering the one-week repo auction rate to 42.5%.
The bank initiated its easing cycle in December 2024, reducing the policy rate by 2.5 percentage points to 45% in January as inflation showed signs of slowing.
Inflation and Economic Growth
Türkiye’s annual inflation rate dropped to a 19-month low of 42.12% in January, with consumer prices rising 5.03% month-over-month, according to official data. Economists surveyed by Anadolu Agency predict the policy rate will decline to 30% by the end of 2024.
Meanwhile, the central bank revised its 2025 inflation forecast to 24% from a previous estimate of 21%, while maintaining the 2026 projection at 12%.
Diverging Inflation Expectations
A recent central bank survey revealed diverging inflation expectations:
Households’ 12-month inflation expectations increased by 0.4 points to 59.2% — the first rise in six months.
The real sector’s expectations dropped by 1.9 points to 41.9%.
Finance Minister Mehmet Şimşek commented that household inflation expectations are more heavily influenced by past inflation trends, while the government expects sentiment to improve as inflation continues to decline.
Robust Economic Growth
Türkiye’s economy grew 3.2% in 2024, sharing the top spot with Spain among the fastest-growing economies in the OECD. The U.S. followed with 2.8% growth, while Lithuania and Norway posted growth rates of 2.7% and 2.1%, respectively.
With inflation easing and economic growth steady, the central bank’s next policy decision on April 17 will be closely watched for further rate cuts to stimulate the economy.
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