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Istanbul Chamber of Commerce (ITO) Chair Şekib Avdagiç on Tuesday said they expect Türkiye’s central bank to lower its policy rate by a total of 1,000 basis points by the end of the year, which would bring down financing costs.
Avdagiç’s remarks come a month after the Central Bank of the Republic of Türkiye (CBRT) returned to a rate-cutting cycle that was disrupted by political turmoil earlier this year. The bank lowered its one-week repo rate by 300 basis points to 43%, as inflation continued to slow under a tighter policy framework.
Avdagiç described the rate cut as “very important and valuable,” and noted that three more Monetary Policy Committee (MPC) meetings remain this year.
“We foresee a total reduction of 1,000 basis points under normal conditions. By year-end, we expect financing costs to come down, and inflation to close below 30%,” he told Anadolu Agency (AA).
Latest official data showed inflation slowed to 33.5% in July, the lowest rate since November 2021, having peaked at 75% in May last year.
The CBRT had hiked the one-week repo rate to 46% from 42.5% in April and lifted its overnight lending rates to 49% following market volatility over the arrest in March of Istanbul Mayor Ekrem Imamoğlu.
Imamoğlu was jailed pending trial over graft charges.
Before April, the CBRT had gradually cut the rate from December as inflation eased.
Avdagiç said the business community strongly supports the disinflation program, but warned that exporters are under pressure due to a widening gap between consumer price inflation and the foreign exchange rate over the past two years.
“In 2024, the difference between inflation and the exchange rate increase stood at approximately 20-25 percentage points, meaning a 25-percentage-point decline in exporters’ income in real terms. This has a dual effect: while it puts pressure on exporters, it also makes imports more attractive,” he noted.
Avdagiç stressed Türkiye must consistently pursue a dual-track policy: on one hand, increasing exports, and on the other, implementing processes to produce more of its imported goods domestically.
“It is essential to keep a constant focus on how we can rapidly localize the components within our import basket, reduce overall import volumes, and simultaneously boost exports,” he said.
“In certain sectors, we are already seeing signs of strain in this regard, particularly in the form of margin erosion.”
The ITO head also flagged declining contributions from exports and investments to economic growth in the last two quarters, saying these areas must return to positive territory to sustain momentum.
Geopolitics, tariffs, Syria
On global developments, Avdagiç pointed to persistent geopolitical risks, from the Russia-Ukraine war to Israel’s genocide in Gaza, as well as U.S. tariff uncertainty under Donald Trump’s second presidency.
“All of these developments are creating inflationary pressure and causing pricing challenges across the globe. We’re seeing customs tariffs introduced, only to be changed within three to five days, extended, multiplied fivefold, or reduced to a quarter,” he noted.
“We wake up each day to a process full of surprises.”
Avdagiç emphasized that the current global environment requires constant vigilance:
“We are in a period where continuous alertness is essential on a global scale. This is not a time when we can define fixed and clear-cut policies. Like other countries, we must manage a highly dynamic process,” he said.
“Türkiye, due to its geographic location and proximity to conflict zones, has to pursue an even more sensitive policy approach.”
Avdagiç also highlighted China’s rising role in global trade, citing its dominance in steel and battery production, saying countries are taking measures in response.
“We, too, have implemented and must continue to implement necessary precautions,” he said.
“It’s clear that global trade is undergoing a profound transformation. Nothing will be the same as before. Under these new conditions, we must reposition ourselves and pursue dynamic policies.”
Avdagiç underscored that Türkiye’s geographic position offers strong logistics advantages, particularly with Istanbul Airport becoming a major hub for both passengers and cargo.
Turning to a new period in Syria following the ouster of longtime dictator Bashar Assad in December, Avdagiç called for a “dual policy” that expands trade while encouraging Turkish investment in reconstruction.
“Türkiye should become Syria’s most important trade partner and investor. The strong ties built over the past 15 years with Syrians in Türkiye provide a unique opportunity,” he said.
