Despite the significant rate cut, the central bank reaffirmed its commitment to controlling soaring inflation which has left many households in Turkey struggling to afford basic needs.
“While inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process,” the bank said in a statement. “The Committee will make its decisions prudently on a meeting-by-meeting basis with a focus on the inflation outlook.”
Annual inflation in Turkey slowed to 44.38% in December 2024 from 47.09% in the previous month, although independent economists say the real rate is much higher.
Inflation surged in recent years, due to a depreciation of the Turkish lira and President Recep Tayyip Erdogan's unconventional economic policies of lowering interest rates despite high inflation.
Erdogan has long argued that high interest rates cause inflation — a theory that runs against mainstream economic theory.
In 2023, Erdogan appointed a new economic team, reversing the unconventional policies and initiating a series of rate hikes. Before the rate cut in December, the central bank had maintained the interest rate at 50% for several months.
Credit: AP
Credit: AP
Credit: AP
Credit: AP