Türkiye’s Central Bank cuts policy rate by 100bps to 36 percent

ANKARA

Data on economic activity indicates that domestic demand remains weak, says the Central Bank.

As widely expected, Türkiye’s Central Bank has reduced its policy rate, the one-week repo auction rate, from 37 percent to 36 percent.

The bank’s Monetary Policy Committee (MPC), led by Governor Fatih Karahan, convened on Oct. 22 to decide about the key interest rate. Expectations for a rate cut were reinforced by September inflation data. Türkiye’s annual consumer inflation rate stood at 29.73 percent in September, below market expectations of 30.3 percent, marking the first reading below 30 percent since November 2021. Consumer prices rose 1.84 percent month-on-month.

The bank on Oct. 22 also lowered the overnight lending rate from 40 percent to 39 percent and the overnight borrowing rate from 35.5 percent to 34.5 percent.

Despite monthly fluctuations, recent inflation figures and leading indicators confirm the deceleration in the underlying trend of inflation, said the bank in a statement accompanying the rate decision.

Data on economic activity as well as the limited pass-through of supply shocks to domestic prices indicate that domestic demand remains weak, according to the bank.

“On the other hand, elevated energy prices due to ongoing geopolitical tensions continue to pose an upside risk to the inflation outlook. The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored,” it added.

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, said the bank.

“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 noted.

The size and timing of policy steps will be decided prudently on a meeting-by-meeting basis with a focus on the inflation outlook, the bank reiterated.

The final MPC meeting of 2026 is scheduled for Dec. 10.

“In case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened,” said the bank, adding that the committee remains highly attentive to upside risks on inflation.

“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,” said the statement, noting that the committee will make its decisions in a predictable, data-driven and transparent framework.