TCMB Announced December Interest Rate Decision: Expectations Were Met

Central Bank of the Republic of Turkey Announces Interest Rate Decision

The Central Bank of the Republic of Turkey (CBRT), in its Monetary Policy Committee (MPC) meeting in December, decided to reduce the policy interest rate in line with market expectations. The interest rate was lowered by 150 basis points to 38%.

Relationship Between Previous Interest Rate Decision and Inflation

CBRT had lowered the rate from 40.5% to 39.5% in its October meeting. In the latest announcement, it was emphasized that inflation in November was lower than expected due to fluctuations in food prices. It was noted that the main trend of inflation slightly declined in October and November after an increase in September.

Disinflation Process and Interest Rate Policy

CBRT emphasized that it would maintain a tight monetary policy stance until price stability is achieved. The committee provided consistent messages that steps would be taken to support disinflation, considering inflation developments, main trends, and expectations. Additionally, it was announced that the policy stance would be tightened again in case inflation expectations increase significantly.

Expectations and Economic Indicators

According to the results of the expectation survey for the MPC meeting, the majority of economists expected a 150-basis point cut. In surveys conducted by AA Finance, the policy interest expectations of 38 economists varied between 39% and 40.5%. According to data from the Turkish Statistical Institute (TÜİK), annual inflation was recorded at 31.07% in November.

Rise in Food and Housing Prices

Annual increases in major expenditure groups such as food and non-alcoholic beverages, transportation, and housing are noteworthy. Food prices increased by 27.44%, transportation by 29.23%, and housing by 49.92%. The contributions of these groups to overall inflation were 6.83%, 4.55%, and 7.57%, respectively.

Exchange Rate and Long-Term Expectations

According to the CBRT's 2025 Market Participants Survey, the participants' inflation expectation for the end of the current year is 32.20%, and the expectation for 12 months later is 23.49%. Expectations for the USD/TRY exchange rate are forecasted to be 43.42 TL at the end of the current year and 50.62 TL in 12 months.

The decisions taken by CBRT and the changes in inflation expectations serve as significant indicators for investors.