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The Central Bank of the Republic of Türkiye reduced its policy rate by 150 basis points to 38% on Thursday, in line with market expectations.
The Monetary Policy Committee decided to reduce the one-week repo auction rate from 39.5% to 38%, according to a statement from the Central Bank of the Republic of Türkiye (CBRT).
"The Monetary Policy Committee (the Committee) has decided to reduce the policy rate (the one-week repo auction rate) from 39.5% to 38%.
The committee has also lowered the central bank overnight lending rate from 42.5% to 41% and the overnight borrowing rate from 38% to 36.5%," the central bank stated.
The Committee lowered the central bank overnight lending rate from 42.5% to 41% and the overnight borrowing rate from 38% to 36.5%.
The central bank noted progress on inflation but continued concerns about underlying trends.
"In November, consumer inflation 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 CBRT stated.
The central bank cited mixed signals in its assessment, noting, "While showing signs of improvement, inflation expectations and pricing behavior continue to pose risks to the disinflation process," the statement noted.
The central bank reaffirmed its commitment to maintaining restrictive monetary conditions until price stability is achieved.
"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," the CBRT stated.
The Committee outlined its forward-looking policy framework, saying, "The Committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets."
The central bank emphasized data-driven decision-making by stating, "The step size is reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook."
"Monetary policy stance will be tightened in case of a significant deviation in inflation outlook from the interim targets," the CBRT added.
The central bank also indicated readiness to employ additional tools if needed to support its disinflation objectives.
"In case of unanticipated developments in credit and deposit markets, the monetary transmission mechanism will be supported via additional macroprudential measures," the statement noted.
"Liquidity conditions will continue to be closely monitored, and liquidity management tools will continue to be used effectively," the statement added.
The Committee reiterated its commitment to achieving the medium-term inflation target through predictable policy decisions.
"The Committee will make its policy decisions to create the monetary and financial conditions necessary to reach the 5% inflation target in the medium term. The Committee will make its decisions in a predictable, data-driven, and transparent framework," the CBRT stated.
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