Introduction to Interest Rate Forecast
The international credit rating agency Fitch has announced its year-end interest rate forecast for Turkey. This prediction comes after the Central Bank of the Republic of Turkey released its third inflation report for 2025. According to Fitch, the Central Bank is expected to reduce the policy interest rate by a total of 800 basis points by the end of the year, bringing it down to 35%.
Central Bank’s Inflation Forecast
The Central Bank President, Fatih Karahan, announced the year-end inflation forecast for 2025 to be in the range of 25%–29%. For 2026, interim targets were set at 13%–19%, and for 2027, at 9%. The goal is to achieve stability in inflation at the 5% level in the medium term. In July, the policy interest rate was reduced from 46% to 43%, the overnight lending rate from 49% to 46%, and the borrowing rate from 44.5% to 41.5%.
Fitch’s Expectation
Fitch predicted that the Central Bank would continue to reduce interest rates until the end of the year, given that July inflation fell to 33.5%. According to the agency, the policy interest rate will be lowered to around 35% by the end of 2025. This means a total reduction of 800 basis points for the remainder of the year.
Past Interest Rate Policy and Trends
Some key points to note about the past interest rate policy and trends include:
- The July reduction was the first major interest rate drop following the 350 basis point increase made in April.
- As a result of rapid increases in interest rates during the 2023–2024 period, the policy interest rate rose to 50%.
- With the subsequent wave of reductions, interest rates began to decline and were lowered to 43% as of July 2025.
Conclusion
In conclusion, Fitch’s year-end interest rate forecast for Turkey suggests a significant reduction in the policy interest rate by the end of 2025. This prediction is based on the Central Bank’s inflation forecast and the current trend of decreasing interest rates. The expected reduction of 800 basis points would bring the policy interest rate down to 35% by the end of the year. This forecast has significant implications for Turkey’s economy and financial landscape, and it will be important to monitor the situation closely in the coming months.
