The turkish central bank stays on hold signals continued caution

Key arguments

• The CBT held the 1-week repo rate at 37% and kept the corridor at 40%/35.5%, as widely expected.
• Renewed US-Iran geopolitical tensions have pushed energy prices higher, raising the risk of a September inflation rebound.
• The government's 2027 inflation forecast was revised up from 9% to 21%, implying a further disinflation pushback in the stabilisation programme launched in mid-2023.
• The CBT is confident weak domestic demand and limited pass-through of supply shocks are preventing broad-based second-round effects.
• Forward guidance retained a prudent meeting-by-meeting approach and an open door to further tightening, with macroprudential and liquidity messaging unchanged.
• ING forecasts the policy rate at 35% by end-2026, with two 100bp cuts in Q4, watching the Middle East conflict, inflation, demand conditions, international reserves and depositor behaviour.

Corresponding source evidence

1. The decision was widely expected and suggests the central bank remains concerned about geopolitical risks, despite easing underlying inflation pressures and subdued domestic demand.
2. The CBT has continued to keep an eye on both the growth and inflation outlook.
3. In the September statement, it does not provide a specific analysis phrase but adds a general sentence that: “Despite monthly fluctuations, recent inflation figures and leading indicators suggest that the underlying trend of inflation is decelerating." Regarding the forward guidance, the CBT reiterated a prudent meeting‑by‑meeting approach and kept the door open to further tightening if needed.