Turkey’s central bank has decided to resume one-week repo auctions, which were suspended on March 1. The authority announced the move on August 23.

The central bank scrapped its one-week repo window, where the main policy rate currently stands at 37%, following the February 28 re-launch of the war on Iran. The regulator occasionally scraps or limits one-week repo auctions to push local lenders to the overnight window, where the rate currently stands at 40%, to achieve additional tightening within the so-called 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%.

Fallen to 37%

On August 24, the central bank opened a Turkish lira (TRY) 1bn ($20.8mn) one-week repo auction. Thanks to the signalling effect, market rates fell in line at 37%. In the coming days, the average cost of funding will also approach 37%.

Lately, as carry trade inflows resumed, the central bank once again bought tens of billions of dollars of FX from the banking system to build up its reserves. As a result, the system is again flush with lira liquidity. The authority absorbs the excess liquidity via depo auctions, where local banks deposit lira at the central bank.

On August 24, the interest rate at the central bank’s one-week depo auction fell to 37.09% from 40.06% on August 21.

Next policy rate meeting Sept 10

On September 10, the monetary policy committee (MPC) will hold its sixth rate-setting meeting of the year. Currently, a 100-bp rate cut is on the cards. Crude oil prices, which are directly connected to the ongoing Middle East conflict, will determine the period ahead.

On July 23, the MPC left its main policy rate (one-week repo) unchanged at 37% for a fourth consecutive time in line with expectations.

The revival of the regulator's one week repo rates was awaited, prior to a cutting of the main rate.

Above 30% at end-2026

On August 13, the central bank raised its end-2026 official inflation "forecast" to 28% in its latest quarterly inflation report from the previously stated range of 26% that it announced in May.

It is not advisable to plan, price or draw inferences based on Turkey’s official data. There is widespread concern about the reliability of the country’s data series.

Even prior to the February 28 US/Israeli attack on Iran, the inflation realisation was expected to come in at above the 20%-level at end-2026.

Since then, financial institutions’ forecasts have broken through the 30%-level in response to the course taken by oil prices.

On August 3, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially edged down to 31.75% y/y in July from 32.11% in June.

Since April, across the last four months, TUIK has released official annual inflation at 32%, with the rounding of decimals. Since July 2025, the figure has been released at between 30.65% and 33.52%.

On November 12, the central bank will release its next quarterly inflation report, the fourth and last of 2026. It will include updated forecasts.