Turkey's Central Bank Cuts Key Rate by 250 Basis Points to 47.5% After 18 Months of Tightening

Dec 26, 2024, 11:47 AM

Turkey's central bank has cut its key interest rate by 250 basis points to 47.5%, marking the first reduction in nearly two years. The decision follows an 18-month period of monetary tightening aimed at combating high inflation rates. The central bank cited a 'flat' underlying inflation trend in November and indicators suggesting a decline in December, alongside a slowing domestic demand, as reasons for the rate cut. This move aligns with market expectations, which ranged from a reduction of 100 to 250 basis points. The rate cut comes after the Turkish government announced a 30% increase in the minimum wage for 2025, set at 22,104 Turkish liras, which is slightly above the hunger threshold but well below the 70% increase demanded by workers' unions.