The monetary policy committee (MPC) of Turkey’s central bank on April 22 left its main policy rate (one-week repo) unchanged at 37% in line with expectations.

The regulator also left its overnight lending rate unchanged at 40%.

The underlying trend of inflation declined in March, the MPC said in its accompanying statement, adding that leading indicators were suggesting a slight increase in the underlying trend in April.

Amid geopolitical developments and the resulting uncertainties, energy prices remained elevated and were exhibiting notable volatility, the MPC also said.

The effects of these developments and domestic energy prices on the inflation outlook through the cost channel and economic activity were being closely monitored, it added.

In a note on the rate decision, William Jackson at Capital Economics said: “So long as energy prices don’t spike again, we think the CBRT [Central Bank of the Republic of Turkiye] will opt to leave interest rates on hold for at least a few more months.

“With disinflation likely to proceed (albeit gradually), we think it’s most likely that policymakers will resume the easing cycle in the third quarter. Our forecast is for the one-week repo rate to end this year at 33%.”

Effective rate at 40%

On March 1, the central bank suspended its one-week repo auctions. The authority occasionally scraps or limits one-week repo auctions to push local lenders to the overnight window for the sake of additional tightening within the interest rate corridor.

As a result of the suspension, the central bank’s weighted average cost of funding and market rates (TLREF) rose to 40%. They remain there.

End-2026 expectations moving through 30%

On April 3, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially edged down to 30.87% y/y in March from 31.53% in February.

On February 12, the central bank raised its end-2026 official inflation “forecast” range to 15-21% in its latest quarterly inflation report. It was moved up from the previously stated range of 13-19% provided in the previous quarterly report released in November.

Even prior to the February 28 US/Israeli attack that started the latest warfare directed at Iran, the realisation was expected to come in at above the 20%-level at end-2026. Depending on the course the oil price takes from here, forecasts might be expected to break through the 30%-level.

On May 14, the central bank will release its next quarterly inflation report, the second of 2026. It will include updated forecasts and a look at the war impacts.

Oil price forecast lifted to $85

In its latest February report, the central bank said it expected the Brent oil price to average in the $60s per barrel in 2026.

Based on the central bank’s previous estimates, the authority calculates a headline inflation increase of about 0.8pp per each 10% increase in the Brent oil price.

On April 1, Turkey’s finance minister, Mehmet Simsek, delivered a presentation to the finance industry in London. His slides showed that Turkey’s economy officials were working with an expected $85 per barrel average Brent oil price in 2026, which would add between 3.6 and 4.4 percentage points to end-2026 annual inflation.

An average of $85 is, of course, right now seen as too optimistic amid Brent prices registering above $100.

The USD/TRY pair remains under control. After the April 8 ceasefire in the Iran war was declared, portfolio inflows to Turkey resumed.

June 11, next MPC meeting

On June 11, the MPC will hold its fourth rate-setting meeting of the year. Currently, no change is the main expectation.

Depending on developments in portfolio inflows, the revival of the rate-cutting cycle with a 100-bp move could be on the cards.

Prior to the onset of the war, the central bank was delivering a rate-cutting cycle. That brought the main policy rate (one-week repo) rate to 37% in January from 46% in July 2025.

Three meetings have been held so far in 2026. A 100-bp cut was introduced in January. In the first meeting held during the era of renewed warfare, the authority on March 12 left its policy rate unchanged.