ALBAWABA - Turkey's central bank made its first interest rate cut in over two years on Thursday, lowering its main interest rate by 250 basis points to 47.5%, Anadolu Agency reports.
The decision comes after the bank raised the policy rate from 8.5% to 50% in order to fight skyrocketing inflation during a series of rate rises that took place from May 2023 to March 2024.
The Monetary Policy Committee of the central bank credited the action to improvements in domestic demand and inflation trends. The annual rate of inflation slowed to 47.1% in November from a record of 85% in late 2022, according to AP.
Vice President Cevdet Yilmaz highlighted the positive effects of Turkey's economic measures, pointing out that inflation has decreased by 28.4 percentage points during the last six months.
“We continue to see the positive results of our economic program in various areas,” Yilmaz said, adding “The positive results of our transparent and predictable policy steps, which ensure strong coordination between monetary and fiscal policies, were instrumental in the Central Bank's decision to cut the policy rate after a period of 22 months.”
After eight months of keeping interest rates constant, the rate decrease indicates a change in monetary policy. After lowering its August projection of 38%, the central bank now predicts that inflation will reach 44% by the end of 2024, according to AFP.
Slowing domestic demand has supported disinflationary efforts, while the country’s current account balance and foreign reserves have shown notable improvement. Yilmaz also reaffirmed Turkey’s aims to reducing inflation to single-digit levels and stabilizing it over the long run.
