- Decision
- Lower
- Rate change
- 100 bps
- one-week repo auction rate
- 39%
The Central Bank of Türkiye cut its policy rate, the one-week repo auction rate, to 36%, citing evidence that underlying inflation is decelerating while domestic demand remains weak. The move followed cuts in late 2025 and a 100-basis-point reduction to 37% in January 2026, followed by holds through September. The central bank also lowered its overnight lending and borrowing rates to 39% and 34.5%, respectively, and said it would continue closely monitoring liquidity and using liquidity management tools effectively. Despite monthly fluctuations, recent inflation data and leading indicators confirmed the slowdown in underlying inflation, while economic activity data and limited pass-through from supply shocks to domestic prices indicated continued demand weakness. Policy remains geared towards achieving the 5% inflation target over the medium term. Elevated energy prices due to ongoing geopolitical tensions remain an upside risk to inflation. The central bank said it would maintain a tight monetary policy stance until price stability is achieved, determine the size and timing of policy steps prudently on a meeting-by-meeting basis according to the inflation outlook, and tighten policy if that outlook deteriorates significantly and persistently.
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 Central Bank of Türkiye’s Monetary Policy Committee paused in March and April 2026 and held the rate through July 2026. 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 its latest decision, the Committee cut the policy rate from 37% to 36%. Recent inflation figures and leading indicators confirmed a deceleration in the underlying trend of inflation despite monthly fluctuations, while economic activity data and the limited pass-through of supply shocks to domestic prices indicated that domestic demand remained weak. Elevated energy prices due to ongoing geopolitical tensions continued to pose an upside 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.