Economy in Turkey: Surprise Interest Rate Hike Decision by the Central Bank
The CBRT raised the policy interest rate by 350 basis points, from 42.5% to 46% for April 2025. This decision surprised markets, as most economists had expected the rate to remain unchanged.
Changes in Other Interest Rates
- Overnight lending rate: Increased from 46% to 49%
- Overnight borrowing rate: Increased from 41% to 44.5%
Highlights from the Official Statement
Inflation and Economic Outlook
- The underlying trend of inflation decreased in March.
- In April, core goods inflation may slightly increase, while services inflation is expected to remain flat.
- Domestic demand was stronger than expected in Q1, reducing its disinflationary effect.
External Factors
- Protectionist trends in global trade, along with movements in commodity prices and capital flows, may influence the disinflation process.
Monetary Policy Messages
- The tight monetary policy stance will continue.
- Inflation expectations and pricing behavior remain significant risks.
- The policy rate will be determined based on inflation outlook.
- All monetary policy tools will be used decisively to support disinflation.
This decision signals a return to monetary tightening and shows the CBRT’s determination to combat inflation.
