A teller counts banknotes at a currency exchange office in Ankara, Türkiye, on July 11, 2025. The Turkish central bank is expected to lower interest rates to support economic activity at its July 24 monetary policy meeting amid cooling inflation, experts and monetary bodies have said. (Mustafa Kaya/Handout via Xinhua)
by Burak Akinci
ANKARA, July 12 (Xinhua) -- The Turkish central bank is expected to lower interest rates to support economic activity at its July 24 monetary policy meeting amid cooling inflation, experts and monetary bodies have said.
The Turkish economy expanded by 2 percent in the first quarter, falling short of expectations amid a tight domestic monetary policy. Meanwhile, annual inflation continued to ease, standing at 35.05 percent in June, slightly down from the 35.41 percent in May. The annual figure peaked at 75.45 percent in May 2024.
The sustained decline in inflation has widened the gap between the annual inflation rate and the central bank's policy rate of 46 percent, which is believed to have provided space for monetary easing.
A survey by the central bank released in June showed that market participants anticipate a rate cut of 300 basis points at the July meeting, potentially bringing the policy rate down to 43 percent.
This sentiment is echoed by leading global institutions including JPMorgan, Morgan Stanley, Citi, and Deutsche Bank, which foresee a cut in the range of 250-300 basis points.
Prominent Turkish lenders also appear aligned with this view. Ziraat Bank and Garanti BBVA have forecast a 300-point cut, while Is Bank is more dovish, expecting a 350-point cut.
The central bank last adjusted its benchmark rate in April, delivering an unexpected rate hike of 350 basis points amid global volatility fueled by U.S. trade tariffs and political tensions in Türkiye. The bank has held rates steady since then.
The central bank now has a "window of opportunity" to begin easing, thanks to favorable macroeconomic dynamics, Istanbul-based economist Atilla Yesilada told Xinhua.
"With headline inflation tumbling and inflation expectations starting to converge with targets, the central bank has the credibility to take the first step toward monetary normalization," Yesilada said, expecting a 300-point cut.
Maintaining a relatively high interest rate for too long could stifle domestic demand just as economic activity shows signs of rebalancing, he said.
"There is a narrow corridor between prudence and over-tightening. Given the progress on inflation, the bank could use this opportunity to support recovery, especially in industry and retail," he said.
Still, the central bank would likely proceed in a "measured and data-dependent manner," mindful of external vulnerabilities such as energy prices, capital flows, and geopolitical risks, he added.
"There is considerable pressure from the market" for a rate cut, Mustafa Sonmez, another Istanbul-based economist, told Xinhua. "A return to monetary easing is forthcoming."
"We believe that a 350-400 basis point interest rate cut in July would be appropriate," Burhan Ozdemir, head of the Independent Industrialists and Businessmen Association, told private broadcaster CNBC-e on Wednesday.
"If the rate cut happens in September instead of July, it would be too late," he said, complaining of high borrowing costs in Türkiye that have especially impacted small and medium-sized enterprises. ■
People walk past Türkiye's central bank in Ankara, Türkiye, on July 11, 2025. The Turkish central bank is expected to lower interest rates to support economic activity at its July 24 monetary policy meeting amid cooling inflation, experts and monetary bodies have said. (Mustafa Kaya/Handout via Xinhua)
