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Economy July 23, 2026 07:04 AM

Central Bank Holds One-Week Repo at 37% as Inflation Dynamics Shift

Policymakers keep key rates steady while flagging temporary uptick in underlying inflation and renewed energy price pressures

By Jordan Park
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Turkey's central bank left its one-week repo rate at 37%, maintaining the overnight lending rate at 40% and the overnight borrowing rate at 35.5%. The Monetary Policy Committee said the underlying trend of inflation eased slightly in June but that leading indicators point to a temporary rise in July. Officials highlighted growing energy price pressures tied to geopolitical uncertainty and confirmed a continuing weakening in domestic demand. The committee reiterated its commitment to a tight policy stance until price stability is achieved and said it will act meeting-by-meeting based on inflation developments and underlying trends.

Central Bank Holds One-Week Repo at 37% as Inflation Dynamics Shift
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Key Points

  • The central bank left the one-week repo rate at 37%, with the overnight lending rate at 40% and the overnight borrowing rate at 35.5%.
  • Underlying inflation eased slightly in June, but leading indicators suggest a temporary rise in the trend in July; energy prices are increasing amid geopolitical uncertainty.
  • Policymakers will maintain a tight stance until price stability is achieved, setting rates meeting-by-meeting based on realized and expected inflation and the underlying trend - implications are particularly relevant for banking, credit markets and exchange-rate sensitive sectors.

Turkey's central bank held its principal policy rate steady on Thursday, keeping the one-week repo rate at 37% in line with a market poll. Alongside that decision, the Monetary Policy Committee left the overnight lending rate at 40% and the overnight borrowing rate at 35.5%.

In an accompanying statement, the committee said the underlying trend of inflation edged down slightly in June. However, it added that leading indicators point to a temporary uptick in the underlying trend during July. The statement also noted energy prices have started to trend higher again amid rising uncertainty tied to geopolitical developments.

The central bank flagged that recent indicators confirm an ongoing weakening in domestic demand. It said it is closely watching how geopolitical developments are filtering through to the inflation outlook via the cost channel, through effects on economic activity, and through expectations.

Affirming its policy stance, the committee said that the current tight monetary policy will remain in place until price stability is achieved. The bank characterized this approach as one that will reinforce the disinflation process through demand, exchange rate and expectation channels.

Policy will be set with reference to realized and expected inflation and the underlying inflation trend. The committee said it will ensure the degree of policy tightness required by the projected disinflation path in line with interim targets. Decisions on the policy rate will be taken on a meeting-by-meeting basis, with the inflation outlook as the central focus.

The statement added that if a significant and persistent deterioration occurs in the inflation outlook, the monetary policy stance will be tightened. The committee emphasized that it remains highly attentive to upside risks to inflation.

To support the monetary transmission mechanism, the central bank said it will deploy additional macroprudential measures if unanticipated developments take place in credit and deposit markets. It also said liquidity conditions will continue to be monitored closely.

Finally, the Monetary Policy Committee reiterated its aim to establish the monetary and financial conditions necessary to reach the 5% inflation target in the medium term. The statement set a clear sequence: monitoring incoming data, assessing the underlying trend, and adjusting the policy stance as needed to remain consistent with the projected path for disinflation.

Risks

  • A temporary rise in the underlying inflation trend during July combined with renewed energy price pressures represents an upside risk to inflation - this could affect inflation-sensitive sectors and households.
  • Unanticipated developments in credit and deposit markets may require additional macroprudential measures - a risk to banking sector liquidity and lending dynamics.
  • If a significant and persistent deterioration in the inflation outlook occurs, the central bank has signaled it will tighten policy further, which could influence borrowing costs and financial conditions more broadly.

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