Turkey: Central Bank decreases rates in October
Central Bank cuts again: At its meeting on 23 October, the Central Bank of the Republic of Turkey (TCMB) reduced the 1-week repo rate from 40.50% to 39.50%. Since June, interest rates have now been cut by 650 basis points.
Uptick in inflation precludes steeper rate cut: The TCBM likely eased its monetary stance to spur the economy, and felt it had room for maneuver since the 1-week repo rate is still notably higher than inflation—meaning real interest rates are positive. However, the rise in inflation in September—following over a year of consecutive monthly declines—likely stopped the Bank from cutting by a larger amount.
TCMB to cut rates further: Our panelists anticipate another rate cut at the last meeting of the year in December, before further monetary easing next year in line with declining price pressures. The spread among panelists’ end-2026 forecasts is large at 1050 basis points though, reflecting uncertainty over the outlook for inflation.
Panelist insight: ING’s Muhammet Mercan commented:
“Based on the MPC statement, it is clear that the TCMB has turned more cautious. It acknowledged an increased underlying trend in September, referring to demand conditions that point to a slowdown in the disinflation process, and citing more pronounced risks posed by recent price developments on the disinflation process. This implies that the TCMB has responded to the deterioration in the inflation outlook by slowing down the rate cuts.”