The Central Bank’s Monetary Policy Committee (MPC) is set to hold its first rate-setting meeting of 2026 this week.
The meeting, scheduled for Jan. 22, will take place in the background of easing inflation. The Consumer Price Index dropped to 30.89 percent in December 2025, the lowest annual level in 49 months.
Most economists expect the Central Bank to deliver another 150 basis point reduction in the benchmark one-week repo rate as it did in the previous MPC meeting.
In December, the bank slashed its main policy rate from 39.5 percent to 38 percent.
Central Bank Governor Fatih Karahan earlier this week reiterated that 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.
In a presentation to international investors in London and New York, Karahan said that the step size will be reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook.
The monetary policy stance will be tightened in the case of a significant deviation in inflation outlook from the interim targets, the governor added.
In the presentation, Karahan warned that the food inflation may rebound early in the year.
“Inflation data over the next two months might be noisy, but lower inertia in services will support disinflation over 2026,” he said.
The Central Bank projects 2026 inflation between 13 percent and 19 percent, with an interim inflation target of 16 percent.
The bank resumed its rate-cutting cycle in July last year.
From May 2023 until March 2025, the bank raised the rate from 8.5 percent to 50 percent, and then kept it constant until its MPC meeting in December 2024, when it lowered the rate 250 basis points to 47.5 percent.
The bank cut the benchmark rate at its December, January and March meetings from 50 percent to 42.5 percent. In a surprise move at its April meeting, the bank raised the rate by 350 basis points to 46 percent, and left it unchanged at the June meeting, before slashing it by 300 basis points to 43 percent at the July meeting.
At its August meeting, the bank lowered the rate by 250 basis points to 40.5 percent, surpassing estimates, before cutting it again by 100 basis points to 39.5 percent in its previous meeting.
