The Central Bank of Turkey (CBT) kept its key interest rate unchanged at 50% during its November meeting, marking the eighth consecutive month at this level. This decision aligns with analysts’ expectations and maintains the highest rate since 2002.
In its statement, the CBT acknowledged improvements in the underlying inflation trend as of October, with domestic demand continuing to weaken, reaching disinflationary levels. While inflation in unprocessed food remained high due to temporary supply factors, services inflation increased, and core goods inflation remained low.
Optimistic inflation expectations have sparked speculation that a rate cut may be imminent. The central bank highlighted that its tight monetary policy stance would help reduce monthly inflation through moderation in domestic demand, a stronger Turkish lira, and improving inflation expectations. It also emphasized that fiscal policy coordination would contribute significantly to this process, reinforcing the disinflationary trend.
The CBT confirmed it would maintain its tight stance until a sustained decline in monthly inflation is observed and inflation is under control. At that point, adjustments to monetary policy could be made to support the disinflationary process while considering inflation risks.
The central bank expects year-on-year headline inflation to fall between 21% and 26% by the end of 2024, and between 12% and 17% by the end of 2025. Market participants share a similar outlook, predicting inflation to be about 26.2% by the end of 2025, further supporting a more optimistic inflation forecast.
