Türkiye’s central bank resumed cutting rates on Thursday. The Monetary Policy Committee, chaired by Governor Fatih Karahan, lowered the one-week repo auction rate by 100 basis points to 36 percent from 37 percent, and lowered the corridor with it: the overnight lending rate fell to 39 percent from 40 percent, and the overnight borrowing rate fell to 34.5 percent from 35.5 percent. The committee had held all three rates at its September 10 meeting, and the cut is the first since January 2026, after which the rate had stayed at 37 percent through the intervening meetings.
The statement’s case for moving now is the inflation trend, not the level. Despite monthly fluctuations, recent inflation outcomes and leading indicators confirm the decline in the underlying trend of inflation, the committee said, and activity data together with the limited pass-through of supply shocks to domestic prices show that domestic demand remains weak. September consumer inflation was 29.73 percent year on year. Against that, the committee repeated that elevated energy prices, sustained by geopolitical tensions, continue to pose upside risks to the inflation outlook, and that the effects of geopolitical developments through the cost, activity and expectations channels are closely monitored.
The guidance kept the easing conditional. The committee said it will set the steps on the policy rate to provide the tightness disinflation requires in line with the interim targets, taking realised inflation, its underlying trend and expectations into account, and that the size and timing of steps will be determined prudently, on a meeting-by-meeting basis, with a focus on the inflation outlook. The tight stance language of the September statement, maintained until price stability is achieved, frames a cycle that is restarting at 100 basis points a meeting, not accelerating.
Expectations were close to unanimous, which limits the surprise. Nineteen of the 20 economists in the AA Finans survey expected a 100 basis point cut and one expected 200 basis points, with a median year-end policy rate forecast of 35 percent; in the Reuters poll, 22 of 24 economists forecast a cut and two forecast no change. Goldman Sachs and Societe Generale were the reported holdouts for a hold, citing inflation risks, and the Turkish think tank TEPAV had urged a pause this week, arguing the investment fund crisis that erupted in mid-September, when the Capital Markets Board ordered 131 funds liquidated, had damaged confidence in ways a cut could aggravate.
The backdrop is why the dissent existed. S&P Global said this week that the central bank’s reserves have partially recovered from their mid-2026 low, to about 167.4 billion dollars by early October, but remain roughly a quarter below the pre-conflict peak of 218.0 billion dollars, with gold about 65 percent of the total, and Commerzbank argued ahead of the decision that further easing raises lira depreciation risks while inflation is not truly on a downtrend. The next meeting is on December 10, 2026, with the meeting summary due October 30 and the inflation report on November 12 as the intervening tests of the trend the committee says it now sees.