Türkiye's central bank holds policy rate at 37% for a fifth straight meeting
The CBRT said underlying inflation is decelerating but warned that energy prices are an upside risk, as reserves rose to $184.2 billion.
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The Central Bank of the Republic of Türkiye kept its one-week repo auction rate at 37 per cent on 10 September, leaving the overnight lending rate at 40 per cent and the overnight borrowing rate at 35.5 per cent, according to its interest rate press release. bne IntelliNews described the outcome as a fifth consecutive hold. In an Anadolu Agency Finance survey of 25 economists, 24 had expected no change and one had expected a 100 basis point cut, AzerNews reported.
The Monetary Policy Committee said that "recent inflation figures and leading indicators suggest that the underlying trend of inflation is decelerating" and that activity data confirm weak domestic demand. It also said "elevated energy prices amid geopolitical developments pose an upward risk to the inflation outlook". The committee repeated that it will tighten policy if the inflation outlook deteriorates significantly and persistently, according to the release.
Inflation and expectations
The summary of the meeting, published on 17 September, gives the data behind the decision. Consumer prices rose 1.84 per cent in August and annual inflation eased by 0.24 percentage points to 31.51 per cent. Energy prices jumped 5.46 per cent on the month on fuel costs. Annual services inflation was around 40 per cent and annual goods inflation around 26 per cent. Annual inflation in the B index, which excludes energy, unprocessed food, alcohol, tobacco and gold, was 30.68 per cent.
The committee noted that the early announcement of Hajj fees and the splitting of university tuition increases between August and September added about 0.25 percentage points to August inflation and will mechanically lower the September reading, the same summary said.
Expectations remain elevated. In the survey of market participants, the year-end 2026 inflation expectation rose by 0.2 percentage points to 29.4 per cent and the 2027 expectation by 0.5 points to 21.9 per cent, according to the summary. Households' 12-month-ahead expectation rose to 45.6 per cent and firms' to 32.8 per cent. bne IntelliNews reported that the central bank raised its official end-2026 inflation forecast to 28 per cent on 13 August, up from 26 per cent in May.
Energy remains the main external pressure. Brent crude averaged $103 a barrel in the first ten days of September, against $91 in August, and the summary attributed the marked rise in energy commodity prices in early September to developments in the Strait of Hormuz.
Reserves, flows and funding costs
External indicators improved between the July and September meetings. Gross international reserves rose by $21.6 billion from 24 July to $184.2 billion on 4 September, and the five-year credit default swap premium fell to 220 basis points on 9 September, the summary showed. Net portfolio inflows totalled $1.1 billion from the previous meeting week to 4 September, made up of $1.3 billion into government domestic debt securities and $0.1 billion of outflows from equities.
Funding costs have eased. Turkish lira deposit rates fell by 255 basis points from the week ending 24 July to 44.4 per cent in the week ending 4 September, and lira commercial loan rates fell by 242 basis points to 49.3 per cent, according to the same document. General-purpose loan rates fell by 221 basis points to 63.0 per cent. The four-week average growth rate of retail loans slowed to 2 per cent, while lira commercial loan growth edged up to 2.5 per cent.
Activity is soft. Gross domestic product grew 2.3 per cent year on year in the second quarter and 1.1 per cent from the previous quarter, and the committee said leading data for the third quarter confirm the weakening in domestic demand, according to the summary. The unemployment rate was 8.1 per cent in July.
Liquidity framework and next meetings
The summary also records a change in how the bank supplies lira liquidity. On 23 August the central bank announced that it would resume the one-week repo auctions suspended on 1 March 2026. The repo auction rate is the policy rate the committee sets.
The committee said the tight stance will be maintained until price stability is achieved and that decisions will be taken meeting by meeting. It reiterated the 5 per cent medium-term inflation target, according to the press release. The next meetings are on 22 October and 10 December, with the summary of the October meeting due on 30 October, AzerNews reported. Economists in the Anadolu survey put the median year-end policy rate at 35 per cent.