Turkey’s Central Bank Holds Interest Rates Steady

The Central Bank of the Republic of Türkiye kept its key interest rates unchanged, reaffirming its commitment to maintaining a tight monetary policy stance to counter persistent inflation risks amid rising geopolitical tensions and higher energy prices.

Following its latest meeting, the bank’s Monetary Policy Committee decided to keep the benchmark one-week repo auction rate at 37%. The committee also maintained the overnight lending rate at 40% and the overnight borrowing rate at 35.5%.

The decision reflects the bank’s cautious approach as policymakers continue to monitor inflation dynamics and external risks affecting the Turkish economy.

In its statement, the committee said the underlying trend of inflation remained broadly stable during February. However, it warned that uncertainty has increased due to geopolitical developments, which have weakened global risk appetite and pushed energy prices higher.

The bank noted that coordinated fiscal and monetary measures are being implemented to limit the potential impact of these factors on the inflation outlook.

Officials added that the effects of geopolitical tensions on inflation expectations are being closely monitored, particularly through their influence on production costs and economic activity.

The committee emphasized that the current tight monetary stance will remain in place until price stability is firmly achieved. According to the bank, this approach will support the disinflation process through several channels, including domestic demand, exchange rate dynamics, and inflation expectations.

Future interest rate decisions will depend on actual and expected inflation trends, ensuring that monetary conditions remain sufficiently restrictive to guide inflation toward its targeted path.

Policymakers also stressed that each decision will be evaluated carefully on a meeting-by-meeting basis, with a strong focus on inflation expectations. Should inflation projections deteriorate significantly and persistently, including due to recent geopolitical developments, the bank signaled that further monetary tightening could be implemented.

The committee added that if unexpected developments occur in credit or deposit markets, additional macroprudential measures could be introduced to reinforce the transmission of monetary policy.