Turkey Holds Key Rate at 37% for Fifth Straight Meeting

Turkey's central bank left its benchmark policy rate unchanged at 37% on Thursday, marking a fifth consecutive meeting without a move as policymakers continue to assess how the Iran war is feeding into inflation.

The decision matched market expectations. In a poll of 17 economists, 16 had forecast no change, while one expected a 100 basis-point cut.

The bank also left its overnight lending and borrowing rates untouched at 40% and 35.5% respectively. The corridor allows the bank to influence the cost of funding in the market when needed without adjusting the benchmark rate itself.

Last month, the central bank resumed one-week repo auctions that had been suspended since March as part of efforts to contain the inflationary effects of the war. During the suspension, the overnight interest rate had hovered around 40%; it has since fallen by 300 basis points.

The conflict has driven up energy prices, a particular strain for import-dependent economies such as Turkey. Inflation stood at 31.51% last month.

In its latest inflation report, the central bank lifted its end-2026 forecast to 28% from 26%. The government expects inflation to reach 28.4% by the end of this year.

Economists still anticipate further monetary easing over the rest of the year, but say they are watching fresh tensions in the region and their potential effect on prices.