Türkiye's central bank cuts its policy rate to 36%, the first easing since January
The Monetary Policy Committee lowered all three policy rates by 100 basis points on 22 October and said recent data now confirm a slowdown in underlying inflation, while energy prices remain an upside risk.
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The Central Bank of the Republic of Türkiye cut its one-week repo auction rate to 36 per cent from 37 per cent on 22 October, according to its interest rate press release. The Monetary Policy Committee also lowered the overnight lending rate to 39 per cent from 40 per cent and the overnight borrowing rate to 34.5 per cent from 35.5 per cent.
It was the first easing since January, and an earlier cut of the same size this year had taken the rate to 37 per cent, Xinhua reported. The committee had held the rate at its next five meetings, the last of them on 10 September, as reported here. The move matched the bank's own Survey of Market Participants, whose respondents had expected 36.0 per cent after the October meeting, according to the October survey report.
The committee's reasons
The statement's central sentence changed between the two meetings. In September the committee said recent inflation figures and leading indicators "suggest that the underlying trend of inflation is decelerating", according to that meeting's release. In October it said that, despite monthly fluctuations, the same indicators "confirm the deceleration in the underlying trend of inflation".
The committee said "domestic demand remains weak", but that "elevated energy prices due to ongoing geopolitical tensions continue to pose an upside risk to the inflation outlook". Annual consumer price inflation was 29.73 per cent in September, the fourth month in a row of slower price growth, Xinhua reported. With the policy rate at 36 per cent, the gap over September's annual inflation is about 6.3 percentage points, a Data Desk calculation from the published figures.
What the bank promised
The release repeated that the tight stance "will be maintained until price stability is achieved". One line of the guidance was reworded: in September the bank said monetary policy decisions are made prudently on a meeting-by-meeting basis, while in October it said "the size and timing of policy steps will be decided prudently on a meeting-by-meeting basis". The committee repeated that "in case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened".
The bank also said that if credit and deposit markets develop in unanticipated ways, the "monetary transmission mechanism will be supported via additional macroprudential measures". It has already used such tools: it cut collateral haircuts in September and eased reserve rules for banks on 1 October. The stated aim remains to create the conditions "necessary to reach the 5 percent inflation target in the medium term".
What comes next
The bank said the summary of the meeting would be released within five working days. The September summary set out the inflation, loan and reserves data behind that month's hold at 37 per cent.
The market expects more. The October Survey of Market Participants, conducted from 12 to 14 October among 71 respondents, 54 from the financial sector and 17 from the real sector, put the policy rate at 35.0 per cent after the December meeting and 34.4 per cent after the meeting after that, according to the survey report. The same respondents expected annual inflation of 29.63 per cent at the end of 2026, a little below the September rate, and 17.94 per cent in 24 months.
The government has raised its year-end inflation forecast to 28.4 per cent from 16 per cent, citing the economic fallout of the Middle East conflict, Xinhua reported. In the weeks before the meeting, non-residents' holdings of Turkish securities fell to $143.2 billion over four weeks, mostly because of lower market values rather than outright selling, as reported here.