Turkey Anticipates 250-Basis-Point Interest Rate Cut Amid Improving Inflation Outlook

Turkey’s financial market expects a significant reduction in the Central Bank’s interest rates following a decline in annual inflation for December, as outlined in the latest survey from the Central Bank of the Republic of Türkiye (CBRT). The January 2025 Market Participants Survey indicates expectations of a 250-basis-point cut in the policy rate, a move influenced by the positive results of the disinflation program and the easing of monetary policy.

The survey, conducted with 68 respondents from financial and real-sector representatives, showed that the current policy rate is anticipated to decrease from 45% at the end of January to 40.91% in the next three months, and further drop to 29.14% over the next 12 months.

The latest CPI projection slightly rose to 4.07% for January, while long-term projections for 12 and 24 months ahead also saw declines. The current account deficit forecast for the year-end has been revised down to $17.4 billion, and the USD/TRY rate forecast also slightly decreased.

Treasury and Finance Minister Mehmet Simsek shared that improvements in inflation expectations will be supported by demand-side and supply-side measures, particularly in food, housing, and energy sectors.

In December 2024, Turkey’s annual inflation rate stood at 44.38%, according to the Turkish Statistical Institute (TurkStat).