- Decision
- Lower
- Rate change
- 250 bps
- one-week repo auction rate
- 42.5%
The Monetary Policy Committee of the Central Bank of Türkiye cut the one-week repo rate by 250 bp to 42.5 percent, citing a slowdown in the underlying trend of inflation in February, moderating services inflation after a January spike, and domestic demand that remains at disinflationary levels. The move follows a 250 bp reduction in January that took the rate to 45 percent from 47.5 percent. The central bank said the tighter stance is curbing demand, supporting real TRY appreciation and tempering inflation expectations, and it reiterated that liquidity will be managed with ongoing sterilisation and, if needed, further macro-prudential steps to reinforce transmission given recent credit growth. While inflation expectations and pricing behaviour are improving, risks to disinflation persist; the bank aims to steer inflation to its 5 percent medium-term target and will adjust the policy rate “prudently” at each meeting, maintaining tight conditions 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.