MPC reduces the policy rate more than expected

TURKEY - Report 11 Sep 2025 by Murat Ucer

The CBRT/MPC reduced the policy rate by a more-than-expected 250 bps today to 40.5%, compared with a revised market consensus of 200 bps, with equal reductions in O/N lending and borrowing rates. To recall, until about 10 days ago, the consensus was another 300 bps cut, but this was revised down on the back of not-so-supportive growth and inflation data, as well as heightened political volatility.

In terms of the content of the statement, an important addition concerns the inclusion of an explicit commitment to “interim targets” so that, “[the m]onetary policy stance will be tightened in case of a significant deviation in inflation outlook from the interim targets”. While this is positive in theory, whether the CBRT will be able to deliver on the promise is yet to be seen or is a big source of uncertainty.

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