People withdraw money from ATMs in Ankara, Türkiye, on Dec. 30, 2024. Following last week's interest rate cut, the first in nearly two years, Türkiye's central bank is likely to lower rates further in 2025 amid a disinflationary trend, experts have said. (Mustafa Kaya/Handout via Xinhua)
by Burak Akinci
ANKARA, Dec. 30 (Xinhua) -- Following last week's interest rate cut, the first in nearly two years, Türkiye's central bank is likely to lower rates further in 2025 amid a disinflationary trend, experts have said.
On Thursday, the bank lowered its benchmark policy rate by a higher-than-expected 250 basis points, bringing its lending rate to 47.5 percent, down from the 50 percent it has stood at since March.
The last time the bank cut rates was in February 2023, when it reduced the benchmark to 8.5 percent, before bringing in a series of increases to curb inflation as part of a disinflation program launched 18 months ago.
The latest rate cut is widely seen as a sign that the bank and the Turkish government believe the country's double-digit inflation is being brought under control.
"We will definitely start lowering the interest rates. 2025 will be the landmark year for this," Turkish President Recep Tayyip Erdogan said Saturday to members of his ruling Justice and Development Party in the northwestern industrial city of Bursa.
"Interest rates will decrease so that inflation will decrease. We will take this step. This is now indispensable for us," Erdogan said.
Sekip Avdagic, president of Türkiye's financial hub the Chamber of Commerce of Istanbul, said in a statement that the latest rate cut has "provided predictability in the economy and met expectations for interest rate plans to be made in a downward direction in 2025."
"In 2025, more rate cuts are to be expected after this first cut that was larger than anticipated by most analysts," Senol Babuscu, a professor of finance from Ankara's Baskent University, told Xinhua.
"The bank may deliver rate cuts at each of its meetings planned for next year, bringing its policy rate to around 30 percent at the end of 2025," Babuscu predicted.
The central bank recently announced it will hold eight Monetary Policy Committee meetings in 2025, with the first scheduled for Jan. 23.
Türkiye's small and middle-sized companies have been complaining about sky-high borrowing costs and exhorting policymakers to reduce rates, Istanbul-based economist Mustafa Sonmez told Xinhua.
"The easing cycle will likely continue in 2025," he said.
Türkiye has achieved a consistent decline in inflation, with November's annual consumer price index falling to 47.09 percent, the lowest level since June 2023, and down from over 75 percent in May.
Amid such economic stabilization efforts, Standard & Poor's upgraded Türkiye's credit rating in November, citing improved monetary policy, stabilization of the Turkish lira, and rebuilding of foreign currency reserves.
However, some experts have cautioned that it would be too early to end the disinflation program, as Türkiye is still witnessing one of the worst cost-of-living crises in its history with stubbornly high prices.
Noting that Türkiye's annual inflation is still very elevated compared to other nations and that uncertainties remain, Sonmez said the central bank might not proceed in an uninterrupted rate-cutting process and might pause in between if it sees less improvement than expected in the inflation outlook.
Disinflation policies have not yet been fully implemented or embraced by consumers, said Arda Tunca, another economist based in Istanbul.
"Lowering interest rates may hamper the inflation struggle and lead to possible upward revisions in 2025," Tunca said. ■
A man walks past Türkiye's central bank in Ankara, Türkiye, on Dec. 30, 2024. Following last week's interest rate cut, the first in nearly two years, Türkiye's central bank is likely to lower rates further in 2025 amid a disinflationary trend, experts have said. (Mustafa Kaya/Handout via Xinhua)
