Türkiye Cenbank Cuts Rates by 250 Points to 45% as Expected

14 January 2025, Türkiye, Istanbul: A man seen rowing his boat along the Moda beach. Photo: Onur Dogman/SOPA Images via ZUMA Press Wire/dpa
14 January 2025, Türkiye, Istanbul: A man seen rowing his boat along the Moda beach. Photo: Onur Dogman/SOPA Images via ZUMA Press Wire/dpa
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Türkiye Cenbank Cuts Rates by 250 Points to 45% as Expected

14 January 2025, Türkiye, Istanbul: A man seen rowing his boat along the Moda beach. Photo: Onur Dogman/SOPA Images via ZUMA Press Wire/dpa
14 January 2025, Türkiye, Istanbul: A man seen rowing his boat along the Moda beach. Photo: Onur Dogman/SOPA Images via ZUMA Press Wire/dpa

Türkiye's central bank cut its key interest rate by 250 basis points to 45% as expected on Thursday, carrying on an easing cycle it launched last month alongside a decline in annual inflation that is expected to continue.

The central bank indicated it would continue to ease policy in the months ahead, noting that it anticipated a rise in trend inflation in January, when economists expect a higher minimum wage to lift the monthly price readings, Reuters reported.
In a slight change to its guidance, the bank said it will maintain a tight stance "until price stability is achieved via a sustained decline in inflation."
Last month, it said it would be maintained until "a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range."
In a Reuters poll, all 13 respondents forecast a cut to 45% from 47.5% in the one-week repo rate. They expect it to hit 30% by year end, according to the poll median.
In December, the central bank cut rates for the first time after 18-month tightening effort that reversed years of unorthodox economic policies and easy money championed by President Recep Tayyip Erdogan, who has since supported the steps.
To tackle inflation that has soared for years, the bank had raised its policy rate by 4,150 basis points in total since mid-2023 and kept it at 50% for eight months before beginning easing.
Annual inflation dipped to 44.38% last month in what the central bank believes is a sustained fall toward a 5% target over a few more years. It topped 75% in May last year.
"While inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process," the bank's policy committee said after its rate decision.
A 30% administered rise in the minimum wage for 2025 was lower than workers had requested, though it is expected to boost monthly inflation readings this month and next, economists say.
The expected January inflation rise "is mainly driven by services items with time-dependent pricing and backward indexation," the bank said.
The central bank has eight monetary policy meetings set for this year, down from 12 last year.



Oil Climbs on Supply Worries, Trump Tariffs Check Gains

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
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Oil Climbs on Supply Worries, Trump Tariffs Check Gains

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo

Oil prices extended gains on Tuesday amid concerns over Russian and Iranian oil supply and sanctions threats despite worries that escalating trade tariffs could dampen global economic growth.

Brent crude futures were up $1.2, or 1.6%, at $77.07 a barrel by 1313 GMT, while US West Texas Intermediate crude rose $1.11 or 1.5% to $73.43.

Both contracts posted gains of near 2% in the prior session after three weekly losses in a row, Reuters reported.

"With the US bearing down on Iranian exports and sanctions still biting into Russian flows, Asian crude grades remain firm and underpin the rally from yesterday," PVM oil analyst John Evans said.

Shipping of Russian oil to China and India, the world's major crude oil importers, has been significantly disrupted by US sanctions last month targeting tankers, producers and insurers.

Adding to supply jitters are US sanctions on networks shipping Iranian oil to China after President Donald Trump restored his "maximum pressure" on Iranian oil exports last week.

But countering the price gains was the latest tariff by Trump which could dampen global growth and energy demand.

Trump on Monday substantially raised tariffs on steel and aluminium imports to the US to 25% "without exceptions or exemptions" to aid the struggling industries that could increase the risk of a multi-front trade war.

The tariff will hit millions of tons of steel and aluminium imports from Canada, Brazil, Mexico, South Korea and other countries.

"Tariffs and counter-tariffs have the potential to weigh on the oil intensive part of the global economy in particular, creating uncertainty over demand," Morgan Stanley said in a note on Monday.

"However, we think this backdrop will probably also cause OPEC+ to extend current production quotas once again, which would solve for a balanced market in [the second half of 2025]", the bank added.

Trump last week introduced 10% additional tariffs on China, for which Beijing retaliated with its own levies on US imports, including a 10% duty on crude.

Also weighing on crude demand, the US Federal Reserve will wait until the next quarter before cutting rates again, according to a majority of economists in a Reuters poll who previously expected a March cut.

The Fed faces the threat of rising inflation under Trump's policies. Keeping rates at a higher level could limit economic growth, which would impact oil demand growth.

US crude oil and gasoline stockpiles were expected to have risen last week, while distillate inventories likely fell, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of weekly reports from industry group, the American Petroleum Institute, due at 4:30 p.m. ET (2130 GMT) on Tuesday and an Energy Information Administration report due on Wednesday.