Turkey’s central bank hints at rate cuts despite inflation remaining above 30%, raising concerns over currency stability.
Turkey’s central bank governor, Fatih Karahan, is signaling potential monetary easing by considering a return to one-week repo auctions. This could lower effective funding costs toward the 37% policy rate from the current 40% overnight lending rate, despite inflation persisting above 30% year-on-year.
Headline CPI remains elevated, and underlying inflation momentum shows little sign of slowing. Analysts warn that premature easing could trigger renewed volatility in the lira, undermining disinflation efforts. The central bank’s stance contrasts with economic fundamentals, which still call for tight monetary policy.
Markets may react negatively if the CBRT proceeds with rate cuts, given the mismatch between policy signals and inflation realities.