WSJ: Turkey’s Central Bank Cuts Rates Again Despite Inflation Risks

The Wall Street Journal reports that the Central Bank of the Republic of Turkey (CBRT) has once again lowered its policy interest rate by 150 basis points, citing a sharper-than-expected slowdown in November inflation. The move was made despite lingering inflation risks, the newspaper noted.

According to the WSJ article, the CBRT cut its one-week repo rate to 38% from 39.5%, marking the fourth consecutive reduction. The 150 basis-point cut exceeded market expectations. Nicholas Farr, an economist at Capital Economics, suggested the decision was underpinned by November’s inflation reading coming in below forecasts.

A Slowdown Driven by Food Prices

Annual consumer inflation in Turkey eased to 31.1% in November. The unexpected drop in food prices was the key driver of the slower pace of disinflation, after a surprise surge in September had kept food prices putting pressure on overall inflation.

Despite the rate cut, the CBRT acknowledged ongoing risks, stating that “inflation expectations and pricing behavior continue to pose challenges to the disinflation process, even as some signs of improvement appear.”

A Series of Rate Cuts in Monetary Policy

In previous meetings, the CBRT had lowered rates by 100 basis points in October, and by 300 and 250 basis points in July and September, respectively. The bank reiterated its commitment to maintaining a “tight monetary policy stance” until price stability is achieved.

Upward Revision in Inflation Forecasts

The CBRT revised its year-end 2025 inflation forecast upward, from the 25–29% range to the 31–33% range, citing food prices as the main reason. The forecast for the end of 2026 remains unchanged at 13–19%.

Capital Economics anticipates a “bumpy” disinflation path in Turkey and expects annual inflation to reach around 22% by the end of next year.

Deutsche Bank: Policy Rate to Fall to 30% by End-2026

Meanwhile, Deutsche Bank’s Research Team viewed the CBRT’s December rate cut to 38% as in line with expectations. The bank projects a cautious easing cycle throughout 2026, with 100 basis-point cuts at each meeting, bringing the policy rate down to 30% by the end of 2026. Deutsche Bank also forecasts inflation at around 24% for the same period.

Balanced Tone in Policy Statement

Deutsche Bank economist Yiğit Onay noted that while the rate cut was slightly larger than anticipated, the CBRT’s policy statement maintained a “balanced” and “cautious” tone.

In its assessment, Deutsche Bank emphasized that the pace of easing would depend on the inflation trend, income policy impacts, and administered price adjustments. While stable geopolitical conditions and low energy prices could accelerate disinflation and allow for faster cuts, any domestic economic or political shocks might call for a more gradual path or temporary pauses.

In the long term, Deutsche Bank expects the policy rate to stabilize at around 25% by the end of 2027 despite persistent inflation uncertainties.

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