Turkey Cuts Interest Rate to 37%, Below Market Expectations

The Turkish central bank decided to cut the interest rate for the fifth consecutive month, though at a slower pace than markets had anticipated, signaling a more cautious approach to monetary easing amid lingering inflation pressures.

The Monetary Policy Committee reduced the one-week repo interest rate to 37% from 38%, falling short of expectations from most economists, many of whom had forecast a larger reduction in borrowing costs.

The move was supported by a slowdown in inflation during December, with annual inflation easing to 30.9%, slightly below the central bank’s revised target range, encouraging policymakers to continue lowering the interest rate despite ongoing risks.

However, central bank officials warned that inflation data in the early months of 2026 could remain volatile due to rising food prices, seasonal effects, and annual adjustments to wages and taxes.

Bloomberg Economics analysts expect the central bank to continue cutting rates in the coming months, but at a measured pace, projecting the policy rate to reach around 27.5% by year-end if inflation continues to cool without major shocks.