The Central Bank of the Republic of Turkey (CBRT) held its key interest rate at 37% for a second consecutive meeting, as policymakers prioritize stability while they assess inflationary risks from volatile energy prices and regional geopolitical fallout from the Iran war.
"So long as energy prices don't spike again, we think the CBRT will opt to leave interest rates on hold for at least a few more months," William Jackson, chief emerging markets economist at Capital Economics, said in a note to clients. He added that policymakers could resume interest-rate cuts in the third quarter.
The decision was widely anticipated, with 19 of 23 economists in a Reuters poll predicting the bank would stand pat. The hold keeps the benchmark one-week repo rate at 37.0%, while overnight lending and borrowing rates also remained unchanged at 40% and 35.5%, respectively. The Turkish lira was relatively stable following the announcement, hovering near a record low of 44.92 per dollar. Inflation stood at 30.87% in March, and the bank noted that "leading indicators suggest a slight increase in the underlying trend in April."
The central bank is balancing a precarious economic situation, halting an easing cycle that began in late 2024 to confront the inflationary effects of the war. In its statement, the policy committee said it is closely monitoring "potential second-round effects" on inflation from the conflict. The path forward for Turkey's monetary policy appears heavily dependent on the trajectory of global energy prices and the stability of the recent ceasefire in the Middle East.
