A 100-basis-point cut ends a five-meeting pause
On Thursday, the Central Bank of the Republic of Türkiye trimmed its benchmark one-week repo auction rate by 100 basis points, bringing it to 36%, in line with what markets had expected. The cut came after five straight meetings in which the committee had held the rate at 37%. The bank also lowered its overnight lending rate to 39% from 40%, and its overnight borrowing rate to 34.5% from 35.5%. The Monetary Policy Committee is chaired by Governor Fatih Karahan.[S1][S2]
Before this reduction, the bank's most recent cut had come in January 2026, when it acted to restrain inflation and contain risks linked to rising energy costs. Between then and Thursday's meeting, the committee held steady as it assessed how the U.S.-Iran war was feeding through to prices. A broad group of economists had expected the Thursday cut and anticipate further easing before the year ends, reasoning that the policy rate sat well above current inflation readings.[S2]
Inflation slows as energy costs remain a risk
Annual inflation in Türkiye fell to 29.73% in September, the first time it has come in under 30% in almost five years, according to official figures. The committee said that despite month-to-month volatility, recent price data and leading indicators support the view that the underlying inflation trend is decelerating. It also said activity data and the modest pass-through of supply shocks into domestic prices show that domestic demand is still weak.[S1][S2]
Even so, the bank flagged that elevated energy prices caused by continuing geopolitical tensions remain a risk that could push inflation higher. The committee said it is watching how geopolitical developments affect the outlook through costs, economic activity and expectations. It repeated that it is paying close attention to upside inflation risks and that the monetary stance will be tightened if the outlook deteriorates significantly and persistently.[S1][S2]
Guidance, liquidity tools and the lira's reaction
The committee said the tight stance will stay in place until price stability is reached, and that it will reinforce disinflation through demand, the exchange rate and expectations. Future decisions, it said, will rest on realized and expected inflation and on the underlying trend, so that the degree of tightness needed to keep the projected disinflation path on track with interim targets is preserved. The size and timing of each step will be judged carefully meeting by meeting, with the inflation outlook as the focus.[S1][S2]
The bank added that additional macroprudential measures would support the transmission of monetary policy if unexpected developments emerge in credit and deposit markets, and that liquidity management tools will keep being used effectively, with liquidity conditions monitored closely. After the announcement the Turkish lira moved only slightly, trading at 49.63 against the dollar, having eased moderately in the preceding weeks.[S1][S2]
