Turkey’s central bank has lowered its key interest rate by 2.5 percentage points, bringing it down from 45% to 42.5%.
The move comes after official data showed inflation had fallen below 40% for the first time in nearly two years.
This marks the third consecutive rate cut by the central bank, signaling a shift in monetary policy after months of aggressive rate hikes. While inflation has eased, the bank cautioned that risks remain. It pledged to monitor trends closely and adjust rates if necessary to maintain economic stability.
Official figures from the Turkish Statistical Institute show annual inflation slowed to 39.05% in February, down from 42.12% the previous month. However, independent economists question the accuracy of these numbers, suggesting real inflation could be much higher.
Turkey has struggled with soaring inflation due to rising energy prices, global economic challenges, and past policies that kept interest rates low despite rapid price increases. President Recep Tayyip Erdoğan has long insisted that high interest rates fuel inflation, a stance that contradicts mainstream economic theories.
In 2023, Erdoğan appointed a new economic team, signaling a departure from his previous approach. The team initially raised interest rates sharply, pushing the benchmark rate to 50% before shifting toward gradual cuts.
As Turkey navigates this transition, the central bank is balancing economic growth with inflation control. While the recent slowdown in inflation offers some relief, uncertainty remains over whether lower rates will sustain price stability in the long term.