The monetary policy committee (MPC) of Turkey’s central bank on July 23 left its main policy rate (one-week repo) unchanged at 37% for a fourth consecutive time in line with expectations.

The regulator also left its overnight lending rate unchanged at 40%.

The underlying trend of inflation decreased slightly in June, the MPC said in its accompanying statement, adding that leading indicators suggest that the underlying trend will rise temporarily in July.

As a result of the growing uncertainty amid geopolitical developments, energy prices have started trending up again, it also noted.

At Capital Economics, chief emerging markets economist William Jackson responded to the MPC's rate hold with a note to investors, saying: "The statement to today’s Turkish central bank (CBRT) decision, at which policy rates were kept unchanged, made clear that policymakers are concerned about the renewed rise in oil prices, which is likely to dash any lingering hopes for a turn to interest rate cuts in the next few months."

Oil and gas poor Turkey is, as a major importer of hydrocarbons, greatly exposed to the oil price.

End-2026 to come at about 30%

On July 3, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially edged down from 32.61% y/y in May to 32.11% in June.

On May 14, the central bank raised its end-2026 official inflation “forecast” to 26% in its latest quarterly inflation report from the earlier stated range of 15-21% provided in the previous report released in February.

On August 13, the central bank will release its next quarterly inflation report, the third of 2026.

The USD/Turkish lira (TRY) pair remains under control. After the April 8 Iran war ceasefire was declared, portfolio inflows to Turkey resumed. On July 7, the clashes began again.

Next policy rate meeting Sept 10

On September 10, the MPC will hold its sixth rate-setting meeting of the year. Crude oil prices, which are directly connected to the ongoing Middle East conflict, will determine the period ahead.

Effective rate 40%

On March 1, the national lender suspended its one-week repo auctions. The authority occasionally scraps or limits one-week repo auctions to push local lenders to the overnight window for the sake of additional tightening within the interest rate corridor.

As a result of the suspension, the central bank’s weighted average cost of funding and market rates (TLREF) rose to 40%. They remain there.

Among market expectations is that the central bank only moves to cut its headline interest rate after first reviving its one-week repo auctions.