In a move intended to strengthen economic stability and support growth, Turkey's Central Bank announced on 6 March 2025 that it was cutting its main policy rate from 45% to 42.5%. The decision follows a slowdown in annual inflation to 39.1% in February 2025, its lowest level since June 2023.
Why the decision was taken, and what it means
This is the third consecutive cut since December 2024, bringing the total reduction so far to 7.5 percentage points. The Central Bank had adopted tight monetary policy in recent years to contain inflation, which peaked at 86% in October 2022. As price indicators have gradually improved, there is now room to ease those constraints step by step.
In its official statement, the Central Bank confirmed that it will continue to monitor price developments and pricing behaviour, noting that it stands ready to use its monetary policy tools decisively should inflation deteriorate unexpectedly.
The challenges ahead
Despite the improvement in inflation, the Turkish economy still faces challenges — chief among them pressure on the lira and savers' continued preference for foreign currency. Inflation expectations and market volatility are likely to remain a decisive factor in the Central Bank's coming decisions.
In closing
The latest rate cut confirms the Central Bank's commitment to supporting economic stability while keeping monetary policy in balance. As it continues to watch the economic data, its future direction will be set by how inflation and growth develop.