Core Viewpoint - The Central Bank of Turkey has lowered the one-week repo rate by 100 basis points to 37%, indicating a continued easing of monetary policy despite ongoing inflation concerns [1][3]. Monetary Policy Actions - The Central Bank's decision to reduce the policy rate from 38% to 37% reflects a commitment to maintain a tight monetary policy stance until price stability is achieved [3]. - The bank will adjust the policy rate based on actual inflation data, fundamental trends, and expectations to align with medium-term targets [3]. - Following the announcement, Turkey's main banking index fell by over 2% [3]. Historical Context - The Central Bank has a history of rate cuts, having reduced the policy rate from 43% in July 2025 to 37% in January 2026, with several significant cuts occurring throughout 2025 [4]. - The recent rate cut continues a trend of easing that began in mid-2025, with cumulative reductions totaling 1,000 basis points over several months [4]. Economic Outlook - Turkey has allocated 1.92 trillion lira (approximately $443.6 billion) for public investment projects in 2026, covering 3,857 major projects with a total estimated cost of 13.99 trillion lira [5]. - The International Monetary Fund (IMF) has raised its growth forecasts for Turkey, projecting a 4.2% growth in 2026 and 4.1% in 2027, up from previous estimates of 3.7% [5]. - The IMF highlighted a significant difference between service and goods inflation, noting that service prices are more resilient to exchange rate shocks but exhibit persistent inflation patterns [5].

Core Viewpoint - The Central Bank of Turkey has unexpectedly lowered the one-week repo rate by 150 basis points to 38%, indicating a complex economic environment with declining inflation and rising GDP growth [3][5]. Group 1: Monetary Policy Changes - On December 11, the Central Bank of Turkey announced a reduction in the policy rate from 39.5% to 38%, exceeding market expectations of a 100 basis point cut [3]. - The Central Bank noted that inflation trends showed a slight decline in October and November, with November's consumer inflation rate falling below expectations due to an unexpected drop in food prices [5]. - The recent inflation data has expanded the Central Bank's operational space, with the interest rate and inflation differential widening to approximately 8.5 percentage points, increasing market bets on further rate cuts [5]. Group 2: Economic Indicators - The Turkish Statistical Institute reported that the monthly inflation rate slowed to 0.87% in November, the lowest since May 2023, while the annual inflation rate decreased to 31.07%, below the expected 31.6% [5]. - The third quarter GDP growth rate was higher than expected, indicating a coexistence of declining inflation and rising economic growth, complicating policy decisions [5]. - JP Morgan's recent report forecasts a 4.4% growth in Turkey's GDP for 2026, with an acceleration expected in the second half of the year, although consumer confidence remains fragile despite improving macroeconomic conditions [8].

Core Viewpoint - The Central Bank of Turkey raised the one-week repo rate from 42.5% to 46%, contrary to market expectations of maintaining the rate unchanged [1] Group 1 - The increase in the repo rate indicates a tightening of monetary policy aimed at combating inflation [1] - The decision reflects the central bank's commitment to stabilizing the Turkish lira and addressing economic challenges [1] - Market reactions may include adjustments in investment strategies and currency valuations following the rate hike [1]