Turkey Forces a Choice: Kill Inflation or Save Growth
The case for holding rates is straightforward: Turkish inflation, while retreating from its 2022 peak, remains stubbornly above targets. Every premature cut risks reigniting price pressures that took enormous social and financial pain to contain. Businesses are hurting, credit is expensive, and consumer spending is cooling — but that cooling is exactly what the disinflation process requires.
Yet growth cannot be sacrificed indefinitely. A slowing economy means rising unemployment, squeezed small business margins, and declining tax revenues — all of which create their own political and social pressure. The question is not whether Turkey will eventually cut rates, but whether policymakers have the discipline to wait until inflation is truly under control before doing so. History, both in Turkey and globally, suggests that jumping the gun carries a far heavier price than patience.
💬 Levent KAYIRA Commentary
Ekonomik Gündem Analysis: This is the defining tension in Turkish monetary policy right now, and anyone with a loan, a savings account, or a business needs to understand where this lands. At 42.5%, the policy rate is doing its job mechanically — credit is expensive, demand is being suppressed, and month-on-month inflation is gradually softening. But the transmission is uneven. Large corporates access alternative financing; it is the small business owner paying 55-60% on a working capital loan who carries the real burden.
From my years managing portfolios through Turkish rate cycles, the most dangerous moment is not the tightening phase — it is the pivot. Cut too early and you undo 18 months of painful work in a matter of weeks, as we saw in 2021. Markets will test credibility instantly.
The TCMB has signaled a data-dependent approach, and the first real rate cut window looks like Q3 2025 at the earliest — only if monthly CPI readings stay below 2.5% consistently. Until then, TL deposit rates above 40% remain the most rational risk-free play for Turkish savers. Growth will lag. That is the price of rebuilding credibility.
Kaynak: Google News Ekonomi