- Inflation in November lower than expected due to downward surprise in food prices, while underlying trend of inflation slightly decline in October and November, says Central Bank

ISTANBUL

The Turkish Central Bank on Thursday lowered its policy rate by 150 basis points, matching the market forecasts.

The benchmark one-week repo rate was lowered from 39.5% to 38%, matching the results of an Anadolu survey.

The bank said the consumer inflation in November was lower than expected due to a downward surprise in food prices. Following an increase in September, the underlying trend of inflation declined slightly in October and November.

"Quarterly GDP growth turned out higher than projected in the third quarter," the Central Bank said in a statement, adding that leading indicators for the last quarter point out that demand conditions continue to support the disinflation process.

"While showing signs of improvement, inflation expectations and pricing behavior continue to pose risks to the disinflation process," it noted.

"The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels," it said.

The bank emphasized that it will guarantee the tightness needed by the projected disinflation path in accordance with the interim targets by determining the policy rate by considering realized and expected inflation, as well as its underlying trend.

"The (Monetary Policy) Committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5% inflation target in the medium term," it added.

Inflation, past meetings

Türkiye's annual inflation rate in November eased to a four-year low of 31.07% from 32.87% in October, below market expectations.

From May 2023 until March 2025, the bank raised the rate from 8.5% to 50%, and then kept it constant until its Monetary Policy Committee meeting in December 2024, when it lowered the rate 250 basis points to 47.5%.

The bank cut the benchmark rate at its December, January, and March meetings from 50% to 42.5%. At its April meeting, in a surprise move, the bank raised the rate by 350 basis points to 46%, and left it unchanged at the June meeting, before slashing it by 300 basis points to 43% at the July meeting.

At its August meeting, the bank lowered the rate by 250 basis points to 40.5%, surpassing estimates, before cutting it again by 100 basis points to 39.5% in its previous meeting.