Türkiye's Central Bank holds policy rate at 37%

Türkiye's Central Bank kept its benchmark policy rate unchanged at 37% on Thursday, maintaining the one-week repo auction rate as inflationary pressures show signs of easing while geopolitical tensions continue to threaten energy costs. The Monetary Policy Committee also held the overnight lending rate at 40% and the borrowing rate at 35.5%, according to a statement released following its regular meeting.

Tight stance until stability

The bank emphasized it would not loosen monetary conditions until price stability is firmly secured. "The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels," the committee said. Officials noted that recent inflation data and leading indicators suggest the underlying trend of price growth is decelerating, even as monthly figures fluctuate.

Demand weakness and risks

Economic activity data point to continued softness in domestic demand, with limited pass-through of supply shocks to local prices confirming this weakness, the bank stated. Elevated energy prices driven by geopolitical developments pose a significant upside risk to the inflation outlook, policymakers cautioned. The central bank has reiterated its commitment to maintaining restrictive settings to anchor expectations and curb price growth.

Forward guidance

The committee outlined its decision-making framework for upcoming meetings, linking future rate adjustments to realized and expected inflation trajectories. "The Committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets," it said. The bank signaled no imminent easing until the disinflation path is firmly secured.