Turkey Cuts Interest Rate

Turkey’s central bank has lowered its benchmark interest rate from 37 per cent to 36 per cent, its first reduction in nine months, citing signs of easing inflation and continued weakness in domestic demand.

The rate cut was announced on Thursday following a monetary policy meeting.

The bank last reduced the rate in January, when it moved from 38 per cent to 37 per cent, before keeping it unchanged at subsequent meetings.

In its statement, the central bank said recent inflation data and other indicators pointed to a continued downward trend, despite monthly fluctuations. It also noted that domestic demand remained weak and supply shocks were having a limited effect on prices.

“Despite monthly fluctuations, recent inflation figures and leading indicators confirm the downward trend,” a bank statement said.

“Data on economic activity and the limited impact of supply shocks on domestic prices suggest that the weak trend in domestic demand continues,” it added.

However, the bank warned that geopolitical tensions continued to keep energy prices elevated, posing a risk to its efforts to contain inflation. It said it was closely monitoring the potential impact of these developments.

Official figures show Turkey’s annual inflation rate fell to 29.7 percent in September from 31.5 percent in August, dropping below 30 percent for the first time in nearly five years.

Finance Minister Mehmet Simsek described the decline as a significant development, saying inflation had reached its lowest level since November 2021. He also noted that the slowdown was broadening across sectors, except transportation.

However, the government’s inflation figures are disputed by ENAG, an independent group of economists that publishes alternative estimates. The group reported annual inflation of 46.6 percent in September, considerably higher than the official figure.