Turkey's central bank left the key interest rate unchanged on Thursday and said it would narrow the interest corridor gradually, citing increasingly uncertain global economic outlook and the slowdown in domestic economic activity.
The Monetary Policy Committee of the Central Bank of the Republic of Turkey led by Governor Erdem Basci decided to maintain the one-week repo rate at 6.25 percent for the sixth month in a row. The decision was in line with economists' expectations.
"The Committee has also stated that it would be appropriate to narrow the interest corridor gradually should the sovereign debt problems regarding some European economies and the concerns on global growth continue to have adverse impact on the risk appetite," the central bank said in a statement.
Further, the bank said all policy instruments may be eased should global economic problems intensify and lead to a contraction in domestic economic activity.
Private consumption is showing signs of slowdown, investment growth is moderating, and external demand outlook remains weak, the bank said. Core inflation is expected to increase modestly due to the slowdown in economic activity, it added.
Inflation eased to 6.24 percent in June from May's six-month high of 7.17 percent. The central bank has an inflation forecast of 5.5 percent for this year.
Due to the recent measures taken by the country's banking regulator, the central bank said, domestic demand is now under control. The bank expects the current account balance to start improving in the final quarter of the year.
Turkey's current account deficit widened further to $7.75 billion in May compared to last year, as the economy continues to wrestle with the rapidly widening funding gap, that the government says could be plugged in by the year end. In March, the gap reached a record $9.7 billion.
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December 26, 2025 08:42 ET Third quarter economic growth data from some major economies including the U.S. were the main news in this holiday shortened week. GDP growth and industrial production data from the U.S. helped to boost morale, while the consumer confidence survey results were less upbeat. In Europe, the quarterly economic growth data from the U.K. drew attention, while the minutes of the Australian central bank’s latest policy session was in focus in Asia.