Central Bank of Turkey cuts policy rate by 250 basis points to 40.50% as underlying inflation slows

The Central Bank of the Republic of Türkiye cut its policy rate, the one-week repo auction rate, by 250 basis points from 43% to 40.5% on 11 September 2025. The Monetary Policy Committee also lowered the overnight lending rate from 46% to 43.5% and the overnight borrowing rate from 41.5% to 39%.

The committee said the underlying trend of inflation slowed in August. It added that while GDP growth was above projections in the second quarter, final domestic demand remained weak, and that recent data indicated demand conditions were at disinflationary levels. Annual consumer price inflation eased to 32.95% in August.

RISKS TO DISINFLATION

The committee noted that food prices and service items with high inertia were exerting upward pressure on inflation, and that inflation expectations, pricing behaviour and global developments continued to pose risks to the disinflation process. It said the tight monetary policy stance would be maintained until price stability is achieved.

The step size will be reviewed “prudently on a meeting-by-meeting basis with a focus on the inflation outlook”, the central bank said, adding that the stance would be tightened in case of a significant deviation in the inflation outlook from its interim targets. The committee reiterated its aim of reaching the 5% inflation target in the medium term.

PACE OF EASING

The September reduction was smaller than the 300 basis point cut delivered in July, which took the policy rate from 46% to 43%, but larger than the 200 basis point move to 41% that the market consensus had expected, according to ING. In a note after the decision, ING said the policy rate could end 2025 between 35.5% and 36.5%, depending on whether the central bank continued with 250 basis point cuts or slowed to 200 basis points.