Central Bank cuts policy rate by 100 bps to 37 percent

ANKARA

Türkiye’s Central Bank has reduced its policy rate by 100 basis points, slowing the pace of its ongoing easing cycle.

The bank on Jan 22 lowered the one-week repo auction rate from 38 percent to 37 percent. Most economists had expected the bank to deliver a 150-basis points reduction. In December 2025, it slashed the main interest rate by 150 basis points.

At its first rate-setting meeting of 2026 on Jan. 22, the bank’s Monetary Policy Committee (MPC) also cut the Central Bank overnight lending rate from 41 percent to 40 percent and the overnight borrowing rate from 36.5 percent to 35.5 percent.

The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate and expectation channels, the bank said in a statement, accompanying the rate decision.

“The committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets,” it added.

“The step size is reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook…. Monetary policy stance will be tightened in case of a significant deviation in inflation outlook from the interim targets,” said the statement.

In case of unanticipated developments in credit and deposit markets, monetary transmission mechanisms will be supported via additional macroprudential measures, it stressed.

“Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively.”

The committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5 percent inflation target in the medium term, the bank said.

While leading indicators suggest that monthly consumer inflation has firmed in January, led by food prices, the rise in the underlying trend of inflation is limited, according to the bank’s statement.

Indicators for the last quarter point to demand conditions that continue to support the disinflation process, albeit at a moderating pace, it added.

While showing signs of improvement, inflation expectations and pricing behavior continue to pose risks to the disinflation process, the bank warned.

The Consumer Price Index dropped to 30.89 percent in December 2025, the lowest annual level in 49 months.