- Decision
- Lower
- Rate change
- 250 bps
- one-week repo auction rate
- 45%
The Monetary Policy Committee of the Central Bank of the Republic of Turkey cut the one-week repo auction rate by 250 bp to 45 percent, citing a lower underlying inflation trend in December but anticipating a temporary uptick in January as service prices adjust and backward indexation persists, while core goods inflation remains subdued and domestic demand is already at disinflationary levels. The Committee said the existing tight stance is aiding disinflation through softer demand, real lira appreciation and improving expectations, yet warned that expectations and pricing behavior still threaten the path to price stability. It pledged to keep policy sufficiently tight, decide rate settings meeting by meeting, and deploy additional macroprudential or liquidity-sterilisation tools if credit or deposit market strains emerge. The authorities reiterated their goal of reducing the underlying inflation trend toward the 5 percent medium-term target and stressed that all instruments will be used decisively until a sustained decline in inflation is secured.
Rate evolution
From June 2025 to April 2026, the policy rate fell by 900 basis points from 46% to 37%, after an initial hold, through successive cuts before the Committee paused in March and April 2026 and held the rate through July 2026 and in its latest decision. The reductions were driven by an overall softer underlying inflation trend and demand conditions judged to be disinflationary, while the Committee said tight monetary conditions, Turkish lira appreciation and improving inflation expectations would support disinflation, even as food prices, service items with high inertia, inflation expectations and pricing behaviour remained risks and external uncertainty was initially monitored mainly through geopolitical developments and trade protectionism.
In the later decisions, the Committee kept the rate at 37% as geopolitical uncertainty intensified and energy prices remained elevated, while recent inflation figures and leading indicators suggested that the underlying trend of inflation was decelerating despite monthly fluctuations. Data on economic activity and the limited pass-through of supply shocks to domestic prices confirmed weak domestic demand, but elevated energy prices posed an upward risk to inflation. The Committee reiterated that policy would remain tight until price stability is achieved, that it remained highly attentive to upside inflation risks and that it stood ready to tighten in case of a significant and persistent deterioration in the inflation outlook.