Levent Gürses
The Central Bank reduced its policy interest rate by 300 basis points from 46% to 43%. However, the expectation was 2.5 points. The Central Bank also reduced the overnight lending rate from 49% to 46% and the overnight borrowing rate from 44.5% to 41.5%. The decision statement noted that a ‘temporary increase’ in inflation was expected in July and that the magnitude of future steps would be determined on a meeting-by-meeting basis.
Despite the interest rate cut, Turkey ranks second in the world in terms of policy interest rates, in line with high inflation. Venezuela has the highest policy interest rate in the world at 59%, followed by Turkey. Zimbabwe has 35% and Argentina 29%. The fifth highest interest rate is 28% in Ghana and 27.5% in Nigeria.
The interest rate stands at 20% in Russia, one of the leading economies in the developing world, and 15% in Brazil…
The business world welcomed the interest rate cut. Şekib Avdagiç, President of the Istanbul Chamber of Commerce (İTO), said, ‘The 300 basis point interest rate cut is in line with the expectations of our business world.’ Avdagiç added, ‘Most importantly, this interest rate cut will gain its true meaning with the opening of credit channels for SMEs.’
Mustafa Gültepe, President of the Turkish Exporters Assembly (TİM), said that they welcomed the interest rate cut as positive but insufficient. Gültepe said, ‘Interest rates need to be cut much faster and at higher rates to ease the investment and production costs of the real sector.’
Nail Olpak, President of the Foreign Economic Relations Board (DEİK), also noted that they expect the cuts to continue in the coming period and that market interest rates will reflect the Central Bank’s cuts without delay.
“The overnight lending rate has been reduced to 46%”
Economists assessed the interest rate cut as follows:
Mahfi Eğilmez: ‘The CBRT cut the interest rate by 3 points. Thus, the new policy rate has been reduced to 43 per cent and the overnight lending rate to 46 per cent.’
Prof. Dr. Hakan Kara: “It exceeded my expectation of 250 basis points and was reduced by 300 basis points. This means they see something I don’t.‘
Iris Cibre: ’The interest rate cut will support market dynamics and further boost economic confidence. The average annual policy rate is now 36%, the compound rate is 43.15%, the inflation forecast is 23.4%, and the real interest rate remains high at 15.8%.”
Foreigners are not very happy with the discount
Foreign investors focused on hot money were not very pleased with the interest rate decision. Timothy Ash, a strategist at Bluebay Asset Management, a London-based company closely monitoring Turkey, said that Central Bank Governor Fatih Karahan had signalled a lower rate cut to financial monopolies in the UK and that today’s decision contradicted this stance.
Ash’s message is as follows: ‘The Central Bank’s move was not very wise. By cutting interest rates more than expected, it went for a 300-basis-point cut. Karahan came to London with a hawkish stance and then made a larger cut than the market had anticipated. This is very poor communication and has damaged credibility.’
Other economic developments of the week:
Car prices are updated following the increase in special consumption tax.
The rates and tax bases for the Special Consumption Tax (SCT) on automobiles have been completely revised. According to a report by Birgün newspaper, both the law and the presidential decree were published in the Official Gazette at the same time. A specific SCT bracket has been established for each vehicle and engine type. This has caused confusion among both the industry and consumers. According to the new regulations, SCT brackets have been set between 70% and 220%. For electric vehicles, the lowest SCT rate starts at 25%. Certain changes have been made to protect domestically produced vehicles.
With the decision on special consumption tax rates, car prices are expected to rise. The tax increases are expected to directly affect not only new vehicles but also the second-hand car market. Following the expected price hikes, the standard range of the Togg T10X V1 RWD is estimated to increase from 1,440,000 Turkish Lira to 1,636,363 Turkish Lira, while the Tesla Model Y Long Range 4×4 is expected to rise from 3,465,581 Turkish Lira to 3,790,772 Turkish Lira.
CHP Deputy Chairman Özgür Karabat reacted to Treasury and Finance Minister Mehmet Şimşek, saying, ‘Mehmet Şimşek, who managed the financial aspect of the 19 March coup, is bullying the public with tax increases.’
Card spending at record levels, debts rising, companies closing
Citizens are even meeting their basic needs with credit cards. As of July 2025, credit card debt reached 2 trillion 357 billion lira. CHP Niğde Deputy Ömer Fethi Gürer said, “Credit card debt, which was 1.8 trillion lira at the end of 2024, rose to 2.3 trillion lira in July 2025. Tables are being set with debt.”
Livelihood difficulties are growing, debts are multiplying. Total individual debt rose by 799 billion Turkish lira in seven months. Since the beginning of the year, individual card debt has increased by 420 billion Turkish lira.
On the other hand, companies are closing rapidly. According to TOBB data, the number of companies established in Turkey in June increased by 11% compared to the same month last year, while the number of companies that closed increased by 27.1%.
In the January-June period of this year, the number of companies established decreased by 0.9% compared to the same period last year, reaching 52,220. During the same period, the number of companies that closed increased by 14.6%, reaching 13,677.
Consumer confidence fell in July
According to data prepared by the Turkish Statistical Institute (TÜİK) and the Central Bank of the Republic of Turkey, the Consumer Confidence Index fell by 1.8% in July 2025 compared to the previous month, dropping from 85.1 to 83.5. An index below 100 indicates pessimism among consumers.
All four sub-indices that make up the consumer confidence index declined in July: The index for the current financial situation of households decreased by 1.6% from 69.3 in June to 68.2 in July. The index for expectations regarding the financial situation of households over the next 12 months fell from 85.8 to 84.6, with a decrease of 1.4%.
Turkey submits new proposal for Yumurtalık-Kirkuk pipeline
Following the agreement on oil exports between Baghdad and Erbil, Turkey did not renew the Kirkuk-Yumurtalık Agreement and submitted a new proposal. President Recep Tayyip Erdoğan decided not to extend the Kirkuk-Yumurtalık Crude Oil Pipeline Agreement, which has been in effect between Turkey and Iraq since 1973, meaning it will expire in July 2026.
The cancellation of the agreement came after the Iraqi government approved a new oil agreement reached with the Iraqi Kurdistan Regional Government (IKBY) five days ago. According to the agreement, the IKBY will transfer 230,000 barrels of oil per day to the Iraqi state company SOMO and receive an advance payment of $16 per barrel. Fifty thousand barrels will be allocated for local consumption, with the cost to be covered by the IKBY. If exports cannot be made, all production will go to the Iraqi government.
This agreement, which signals a softening of the Baghdad-Erbil line, could pave the way for the Kirkuk-Ceyhan pipeline to be put back into service. Eleven years ago, Iraq filed a lawsuit against Turkey on the grounds that it exported IKRG oil without the permission of the Baghdad government. Although Turkey was fined, the case has not yet been resolved. However, as a result, the oil pipeline has been effectively closed since 2023.
Indeed, following the new agreement reached in Iraq and Turkey’s cancellation of the current agreement, which had reached an impasse, the first step has been taken. Anadolu Agency announced that talks have begun between Ankara and Baghdad on a more comprehensive agreement on the transport of Iraqi oil.
The Central Bank has reduced credit card interest rates
The Central Bank has reduced the monthly reference rates for the maximum contractual interest rates applicable to credit card transactions in Turkish Lira. When calculating the maximum contractual interest rates, the monthly reference rate previously increased by 114 basis points for credit cards with outstanding balances between 25,000 and 150,000 Turkish Liras, but this has been reduced to 89 basis points under the new regulation.
“70% of Muğla’s forests and 60% of its land included in mining licence areas”
Speaking about the law allowing olive groves to be opened up for mining activities, Muğla Metropolitan Mayor Ahmet Aras said that 70% of Muğla’s forests and 60% of its land have been included in mining licence areas.
Aras noted that the law allowing olive groves to be opened up for mining activities had passed through Parliament despite all objections, stating, “This law directly threatens tourism. Tourism is the main sector of our province. The accommodation sector is the most critical link in this chain. Without accommodation, the food and beverage, entertainment, and maritime sectors will also be disrupted. However, the sector is currently facing a serious crisis. That is why we are listening to the demands of sector representatives and will reconsider issues such as water tariffs.”
ECB keeps key policy rates unchanged in line with market expectations
The European Central Bank (ECB) has kept its deposit rate at 2%, its refinancing rate at 2.15% and its marginal lending rate at 2.40%. The ECB announced its monetary policy decisions taken at its fifth Governing Council meeting of the year. The ECB had cut interest rates at its previous four meetings this year.
Market expectations were also that the ECB would not change interest rates at this meeting. Annual inflation in the Eurozone was measured at 2% in June. The ECB’s decision was notable given the uncertainty surrounding the tariffs that the US plans to impose on the European Union (EU). The ECB believes that the interest rate cuts made in the past are sufficient at this stage to counter potential economic developments.
Stock markets break new records on the back of technology and AI
Despite uncertainty surrounding trade wars and geopolitical tensions, stock market indices around the world are delivering high returns and breaking historical records on the back of technology and artificial intelligence. NVDIA, a manufacturer of processors for artificial intelligence, became the first company to exceed a market value of $4 trillion.
On Wall Street, the Dow Jones, S&P 500, and Nasdaq indices, along with European indices such as the FTSE 100 in the UK, have set new records. As of the close on Thursday, 24 July, the S&P 500 index closed at an all-time high for the fourth consecutive day. This has occurred 13 times in 2025. During the week, the S&P 500 surpassed 6,000, the technology-heavy Nasdaq surpassed 21,000, and the UK’s FTSE 100 index surpassed 9,000 points.
As of 24 July, the Tokyo Nikkei 225 index provided the highest return of 4.27% in the last week, while the Borsa Istanbul BIST 100 index came in second with 3.11%. The Hong Kong Hang Seng index rose by 2.33%, and the Shenzhen Composite index also increased by 2.26%.
The FTSE 100 rose by 1.63%, the S&P 500 by 1.06%, and the Dow Jones and Nasdaq by 0.8%.
Brussels responds to Trump’s 30 per cent tariff threat
The European Union is preparing to respond to US President Donald Trump’s tariff threats by imposing tariffs of up to 30 per cent on US goods and services worth €93 billion from 7 August if no agreement is reached.
The Trump administration’s threat to impose a 30% tariff on imports from Europe, following its agreement with Canada on a 15% tariff and its imposition of a 35% tariff on Japan and a 50% tariff on Brazil, has angered Brussels, but bureaucrats are working to prevent a trade war. However, given Trump’s unpredictability, the agreement remains uncertain.
If no agreement is reached between the parties, the US plans to impose a 30% tariff on products shipped from EU countries starting 1 August.
Customs duties reflected in prices: Inflation in the US stands at 2.7 per cent
Trump’s customs duties are beginning to affect consumers’ wallets: Inflation in the US rose to 2.7 per cent in June.
Core inflation, which excludes food and energy price volatility, stood at 2.9%.
Experts had emphasised that June would be the first month to see the real impact of customs duties, following months of threats, back-and-forth moves and last-minute reversals by Trump.
Economists believe that the impact on inflation has been delayed so far because companies sold off stockpiles accumulated before the tariffs took effect and hesitated to pass on higher costs to consumers. June data indicates that cost transfers have begun.
Europe is losing the artificial intelligence race
It is said that Europe’s corporate giants have been left far behind by the enormous growth in artificial intelligence of the large technology companies known as the ‘Magnificent Seven’ in the United States. While technology is growing rapidly in the US, Europe’s leading companies (mostly in traditional sectors) are struggling to keep pace with the innovation-driven new economy. The continent’s largest companies are lagging behind their US rivals, particularly in the rapidly developing technology sector.
As of mid-July, the total market value of Europe’s seven largest publicly traded companies (SAP, Novo Nordisk, Hermès, ASML, LVMH, Roche and Nestlé) stood at $2.2 trillion (€1.73 trillion), a figure that has remained virtually unchanged since the beginning of the year.
In contrast, the ‘Magnificent Seven’ (Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta, and Broadcom (replacing Tesla)) have reached a cumulative valuation of 18.8 trillion dollars (16.12 trillion euros), marking a 10.2% increase since the start of the year.
Efforts to revive the Syrian economy by integrating it with the West…
Following the lifting of sanctions, efforts to integrate the Syrian economy into the global economy continue. The new Syrian administration, under US guidance, is reaping the benefits of these alliances. The period of economic isolation is over, and the country has been connected to the international banking system via SWIFT for the first time. American banks are supporting the financial system. It is stated that the economy needs significant external support. The reconstruction of the country is estimated to cost $250 billion. After years of contraction, the World Bank has predicted that the economy will grow by 1 per cent this year.
On the other hand, it has been stated that the process of economic restructuring in Syria is being carried out by a ‘shadow’ committee, whose members include Hazim Shara, the brother of HTŞ leader Shara. In line with the committee’s steps, capital in Syria has begun to change hands.
The committee’s task is to define the framework of the economy during the Bashar al-Assad era and decide what should be preserved and what should be restructured. Among its powers are the referral of businessmen believed to have acquired their wealth through illegal means to the judiciary and the direct seizure of companies. Instead of resorting to these measures to prevent the economy from grinding to a halt, a more ‘peaceful’ approach is being taken, with secret agreements being made with individuals who were active during the Assad era.
Is the Russian economy on the brink of collapse after 40 months of war?
It is reported that the Russian economy is on the brink of collapse after 40 months of war. According to a report in the Spanish newspaper El Pais, the economic vitality driven by defence spending and production in 2023 and 2024 is now a thing of the past. The Russian economy’s engine is clearly faltering, as even the Kremlin has begun to admit.
Inflation is high, and contraction is expected in the second and third quarters. The economy is on the brink of stagflation… There is unemployment outside the defence industry, prices are rising, and wages and payments cannot be made.
Re-nationalisation of Thames Water on the agenda
The re-nationalisation of Thames Water, the UK’s largest water and sewerage company, has been put on the agenda after it reached the brink of bankruptcy. Preparations are underway for the temporary nationalisation of Thames Water, which has debts totalling £14 billion and is experiencing service disruptions for its subscribers. UK Energy Minister Steve Reed stated that the government is continuing its preparations in this direction and will provide the company with 5.3 billion pounds in fresh funds for creditors waiting at the door.
Thames Water, which was privatised in 1989, provides water, wastewater and sewerage services to 16 million people, mainly in London and the surrounding area.
Water privatisation has left the British regretting their decision
A research report in the UK paints a bleak picture of the country’s water distribution system, which was privatised in the 1980s. The problems caused by privatisation include inefficiency, disregard for environmental standards, leaks and poor water quality. Environment Minister Steve Reed has taken the first step in addressing the issue. The current Water Services Regulation Authority will be abolished and a completely new structure will be established. The Economist magazine noted that overloaded sewage and treatment plants discharge untreated wastewater into rivers and seas, especially during heavy rainfall, describing it as ‘frustrating.’ The Environment Agency (EA), a regulatory body, reported on 18 July that 75 “serious” pollution incidents in 2024 posed a high risk of killing fish or harming swimmers. This figure was 47 in the previous year. It makes sense to bring together economists, engineers and environmental scientists. However, it will take years to see effective change.”
The Guardian, meanwhile, stated that Thames Water has done nothing to deserve being bailed out with taxpayers’ money and should be allowed to go bankrupt, saying, “Angry customers have no choice but to continue paying bills that are expected to rise by a third over the next five years. Meanwhile, as we enter a new era of summer droughts and winter floods, people are questioning how such a valuable asset could be managed so poorly.”
Record number of signatures against France’s agricultural law
A petition launched by a female university student against France’s new agricultural law, which was signed by 1.7 million people in just two weeks, has increased pressure on the government. The law, known as the ‘Loi Duplomb,’ relaxes environmental regulations on the use of pesticides, including Acetamiprid. Despite being banned in France for several years, this substance is permitted for use in other EU countries.
The newspaper Libération welcomed the French people’s action, writing:
“This situation starkly contradicts the widespread belief that citizens are losing interest in politics and distancing themselves from it. A new participatory democracy tool, actively used by citizens, has emerged. The economic lobbies of the agriculture and food sectors had assumed they could continue to operate behind the scenes as usual, but their expectations have been largely dashed.”
