by Burak Akinci

ANKARA, March 6 (Xinhua) -- Türkiye's central bank on Thursday cut its policy rate by 250 basis points to 42.5 percent, the third rate cut in a row after keeping rates steady for months, continuing a monetary easing path as inflation eases.

The cut is in line with market expectations. Experts predict that inflation will further decrease throughout the year, although it will still exceed year-end targets.

In January, the central bank raised its year-end inflation forecast for 2025 to 24 percent, up 3 percentage points from the previous forecast.

Despite this upward revision, "the bank has decided to go on with monetary easing as consumer prices have continued to ease," said Senol Babuscu, an economist and scholar at Ankara's Baskent University.

Official data issued on Monday showed that Türkiye's annual inflation fell to 39.05 percent in February, down from 42.1 percent in January, hitting the lowest level in almost two years and increasing expectations for a new rate cut.

Türkiye's wholesale inflation also declined in February, as the producer price index decreased from 27.2 percent in January to 25.21 percent.

Although the central bank enacted two rate cuts of 250 basis points in past months -- one in December last year and the other in January -- its governor, Fatih Karahan, stated last month that "the bank is not operating on autopilot" and makes its decisions based on data.

William Jackson, an economist at Capital Economics, an economic research company, predicted in a note to investors that the bank will further cut interest rates in the coming months and that the policy rate will end the year at around 31 percent.

Since mid-2023, Türkiye has shifted toward more conventional monetary policies, led by Treasury and Finance Minister Mehmet Simsek. To curb soaring inflation, the central bank had previously raised its key policy rate by 4,150 basis points, which reached 50 percent in March 2024 and remained stable until last December.

Although Türkiye's economic policymakers have taken steps to stabilize the economy, prices in essential sectors such as food, housing, and transportation continue to rise.

A poll, conducted by Ankara-based Asal Research in late February and published on Tuesday, revealed that 61.2 percent of respondents cited the "Economy/High Cost of Living" as a primary concern.

Atilla Yesilada, an Istanbul-based economist, suggested that one more rate cut will come in April before a potential pause to assess the situation for the rest of the year.

"Ramadan, the Muslim holy month, typically increases inflationary pressures, and the central bank will need to tread carefully regarding future decisions," the analyst explained.

Yesilada predicted that the pace of inflation decline will slow after April, adding pressure on policymakers who need to decide on either pausing or continuing monetary easing for the rest of 2025. Enditem

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