Turkey Holds Interest Rate, Signals Ongoing Caution

Turkey's central bank kept its key interest rate steady at 46% and maintained the upper band of its rate corridor at 49% in June 2025, following a substantial rate hike in April aimed at stabilizing the lira after political turmoil. Policymakers signaled that tight monetary policy will persist until price stability is achieved, noting that inflation eased to 35.4% in May. The bank stated it would remain flexible and use policy tools as needed should inflation risks re-emerge, allowing for potential further tightening. While some economists expect possible rate cuts as early as July, any easing is projected to be moderate due to the ongoing need for high real interest rates. The central bank's approach reflects ongoing concerns over inflation, exchange rate stability, and weakened domestic demand in the context of global economic uncertainties. The decision aligns with market expectations and underscores a cautious stance towards monetary easing.