The Central Bank has reduced the policy rate by 250 basis points in line with expectations, bringing it down to 42.5 percent. The Central Bank of the Republic of Turkey stated that leading indicators supported the decline in inflation, emphasizing that a tight monetary policy stance will be maintained.

In March, the Central Bank lowered the policy rate from 45 percent to 42.5 percent with a 250 basis point cut. A reduction of 250 basis points was also expected in the markets. With this decision, the Central Bank has now cut interest rates for the third consecutive meeting. “DECREASE IN INFLATION TO CONTINUE” The Monetary Policy Committee’s statement included the following remarks: “The main trend of inflation decreased in February following the increase in January. During this period, while core goods inflation remained relatively low, services inflation slowed down after the increase specific to January.

Domestic demand, although higher than expected in the fourth quarter, supported the decrease in inflation at supportive levels. Leading indicators imply that this supportive outlook will continue in the first quarter of the year.

The effects of the monetary policy stance on credit and deposit markets and domestic demand are closely monitored.

Although inflation expectations and pricing behaviors show an improvement trend, they continue to pose a risk factor in terms of the disinflation process.

“MAINTAINING A TIGHT MONETARY POLICY STANCE” The consistent stance in monetary policy strengthens the disinflation process through balance in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations.

Increased coordination of fiscal policy will also make a significant contribution to this process. A tight monetary policy stance will be maintained until a permanent decrease in inflation and price stability are achieved.

In this regard, the policy rate will be set in a manner that provides the necessary tightness required by the expected disinflation process, taking into account inflation developments, main trends, and expectations.

The Committee will determine the steps to be taken regarding the policy rate with a focus on the inflation outlook, in a cautious and meeting-based approach.

If a significant and lasting deterioration in inflation is expected, monetary policy tools will be used effectively.

ADDITIONAL STEPS FOR A TIGHT STANCE Taking into account recent developments in credit growth, additional measures have been taken to maintain macro financial stability and support a tight monetary stance.

If there are developments in credit and deposit markets that are unforeseen, the monetary transmission mechanism will be supported with additional macroprudential measures.

Liquidity conditions will be closely monitored, and sterilization tools will continue to be used effectively.

EMPHASIS ON 5 PERCENT TARGET The Committee, considering the delayed effects of monetary tightening, will determine monetary and financial conditions to bring down the main trend of inflation and achieve the 5 percent inflation target in the medium term.

In this respect, all monetary policy tools will be used decisively. The Committee will make decisions in a predictable, data-focused, and transparent framework.”