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The Central Bank of the Republic of Turkey decided Thursday to maintain its one-week repo auction rate at 37 percent, matching the forecast of every economist in a Reuters poll. The lira held steady at 47.2350 to the dollar following the announcement while the main Istanbul share index edged slightly higher. The bank left its overnight lending rate at 40 percent and its borrowing rate at 35.5 percent, using the corridor to steer market funding costs as needed without altering the benchmark.
Central bank officials said leading indicators show the underlying inflation trend will rise temporarily in July after easing slightly in June. “As a result of the growing uncertainty amid geopolitical developments, energy prices started trending up again… The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored,” the bank said in its statement. Governor Fatih Karahan warned in a presentation earlier this month that the recent uptick in underlying inflation creates upside risks to near-term price gains.
The decision marks the fourth straight meeting without a change since the Iran war began at the end of February, according to central bank records. That conflict prompted the bank to halt an easing cycle started in late 2024 and introduce liquidity steps that pushed the lira overnight rate to the corridor’s 40 percent ceiling. Trading Economics figures show the policy rate has remained at 37 percent since January 2026 after a series of increases and cuts in 2025 that peaked above 46 percent.
Inflation stood at 32.11 percent in June, the central bank reported last month. In its quarterly inflation report released in May, the bank lifted its interim target for the end of 2026 to 24 percent from 16 percent, noting that short-term effects of the conflict would stay pronounced. The CBRT continues to monitor import-reliant sectors vulnerable to energy price swings caused by the regional turmoil.
The monetary policy committee has focused on containing cost-channel pressures from higher energy costs and shifting expectations, according to its published communications. This approach follows earlier adjustments that included temporary suspension and resumption of one-week repo auctions during volatile periods in 2025. Further clarity on the bank’s outlook is scheduled for release in its next inflation report in August.
