Türkiye’s Central Bank Is Expected to Hold Rates at 37%

Türkiye’s central bank is widely expected to keep its one-week repo rate at 37% on July 23. Annual inflation slowed to 32.11% in June, but another rise in oil prices and risks to shipping through the Strait of Hormuz have weakened the disinflation outlook. The formal policy rate is 37%, although effective monetary conditions are tighter because the banking system’s weighted average funding cost is close to the 40% upper end of the interest-rate corridor.

The decision is due on July 23

The Central Bank of the Republic of Türkiye will hold its Monetary Policy Committee meeting on July 23, 2026. The decision is scheduled for release at 2pm local time. Bloomberg published its report before the meeting, meaning that an unchanged rate remains a forecast rather than an announced decision.

All ten economists surveyed by Reuters between July 13 and July 20 expected the one-week repo rate to remain at 37%. Their median year-end forecast was 35%, implying limited easing during one or more of the remaining meetings of 2026.

A separate Anadolu survey of 16 economists also produced a unanimous forecast for no change and an average year-end estimate of 35%.

Effective funding conditions are closer to 40%

The official one-week repo rate is 37%. The overnight lending rate is 40%, while the overnight borrowing rate is 35.5%. These levels have been in place since January 22.

The headline policy rate does not fully describe current monetary conditions. The CBRT suspended one-week repo auctions in early March. Most liquidity was subsequently supplied through more expensive short-term facilities, taking the weighted average funding cost toward 40%.

It would therefore be inaccurate to say that the banking system currently receives most of its central-bank funding at 37%. The formal benchmark is 37%, but the effective cost of short-term funding is close to 40%.

A resumption of regular one-week repo auctions could become the first stage of monetary easing before the formal policy rate is reduced.

January’s cut was the fifth since July 2025

An earlier version incorrectly described January’s move as part of an uninterrupted easing cycle that began in late 2024. The CBRT raised rates in April 2025, interrupting the earlier sequence.

The current uninterrupted series began in July 2025. The policy rate subsequently fell from 46% to 43%, 40.5%, 39.5%, 38% and finally 37% in January 2026. January’s decision was the fifth consecutive cut in this sequence.

The bank then kept the formal rate unchanged in March, April and June. A July hold would mark a fourth consecutive meeting without a change in the one-week repo rate.

Inflation slowed to 32.11%

Consumer prices increased by 0.99% in June and by 32.11% from a year earlier. Annual inflation had been 32.61% in May.

The B core index increased by 31.18% annually, while the narrower C measure rose by 29.84%.

Energy prices declined by 0.91% during June as motor fuel became 4% cheaper. Electricity nevertheless increased by 2.69% and natural gas by 2.09%. Annual energy inflation remained at 39.41%.

Food prices rose by 35.44% over the year, including a 37.5% increase in processed food. Lower fresh-vegetable prices helped contain the monthly headline figure.

Services inflation remains persistent

Services prices increased by 1.69% during June and by 39.64% over the year. Rents rose by 2.66% monthly and 47.87% annually.

The lower headline reading therefore did not mean that inflationary pressure had disappeared. Part of the improvement came from temporary reductions in fuel and fresh-food prices, while rents, services and processed goods continued to rise rapidly.

The CBRT said monthly underlying inflation had eased only modestly, while three-month average measures had increased slightly again. One relatively favourable release was therefore insufficient to demonstrate sustained disinflation.

Oil has renewed the external inflation threat

Brent crude rose above $95 a barrel during trading on July 22 before moving around the $94–95 range. The increase reflected escalation around Iran and concerns over shipments through the Strait of Hormuz.

Türkiye relies heavily on imported energy. Higher oil prices feed into fuel, transportation, industrial production and agricultural costs. They also increase demand for foreign currency to finance imports, potentially weakening the external balance and putting pressure on the lira.

A weaker lira raises the domestic cost of imported goods, allowing the energy shock to affect inflation through fuel, business costs and the exchange rate.

In its June statement, the CBRT described energy prices as elevated and volatile. It said the monetary stance could be tightened if the inflation outlook deteriorated significantly and persistently.

A 10% oil increase could add one inflation point

The CBRT’s May Inflation Report estimated that a persistent 10% increase in crude-oil prices could add approximately 0.9–1 percentage point to consumer inflation during the first year.

The cumulative effect could reach around 1.3 percentage points after two years, with roughly 70% of the impact occurring during the first 12 months.

The first-round effect comes mainly through fuel, followed by transportation services and wider production and distribution costs.

This is a model estimate rather than a precise projection for the current conflict. The actual impact will depend on the duration of the oil shock, the lira, taxes, administered tariffs and inflation expectations.

The 24% interim target is not the 26% forecast

The central bank has set an interim end-2026 inflation target of 24%. Its interim targets for 2027 and 2028 are 15% and 9%, while the medium-term objective remains 5%.

The official central forecast for end-2026 inflation is nevertheless 26%, not 24%. The 24% figure is a policy benchmark, while 26% represents the bank’s expected outcome under current conditions.

The two figures should not be used interchangeably.

Private-sector expectations remain higher

The July Survey of Market Participants was conducted between July 13 and July 16. The permanent panel contains 72 members, but 65 submitted responses this month: 50 from the financial sector and 15 from the real economy.

Respondents forecast end-2026 inflation of 29.21%. Their expectations stood at 23.95% for the next 12 months, 17.83% for the next two years and 11.5% over five years. The longer-term readings remain well above the official 5% objective.

Participants expected the policy rate to remain at 37% after the first upcoming meeting, decline to 36.55% after the second and reach 35.73% after the third. Their average year-end estimate was 34.7%. These figures represent respondents’ expectations rather than a CBRT forecast or commitment.

The expected dollar exchange rate was 51.55 lira at the end of 2026 and 56.69 lira in 12 months. These are private forecasts, not central-bank targets.

Credit and mortgages remain expensive

For the week ending June 5, average lira commercial-loan rates stood at 50.5%. General-purpose consumer loans averaged 64.1%, vehicle loans 45.9% and housing loans 39.3%. Average lira deposit rates reached 47.7%.

Expensive credit restricts household demand, vehicle and property purchases and corporate investment. This is part of the disinflation mechanism because weaker demand reduces companies’ ability to raise prices.

The trade-off is slower economic activity. Türkiye’s economy expanded by 2.5% from a year earlier in the first quarter of 2026 but by only 0.1% from the previous quarter.

Mortgage borrowers will see little immediate relief

Keeping the formal rate at 37% while effective funding remains close to 40% would not create conditions for an immediate fall in mortgage rates.

Homebuyers will continue to rely heavily on savings, foreign currency, gold or developer instalment plans. Borrowers using bank financing will face a high monthly repayment burden.

Developers will also continue to face expensive project finance, working capital and debt servicing.

High interest rates do not guarantee falling nominal property prices. They may reduce mortgage-financed transactions and affordability, while inflation, land prices and construction costs continue to support asking prices. This is an inference based on current credit and inflation data.

Limited easing remains possible later in 2026

Economists still expect some monetary easing before the end of the year. The Reuters median points to 35% in December, while the CBRT’s market survey suggests 34.7%.

The timing will depend on underlying inflation, oil prices, the lira, domestic demand, administered tariffs and inflation expectations.

A resumption of weekly repo auctions would be an important signal. Moving the principal funding cost from around 40% back toward the 37% policy rate would ease effective financial conditions even before a formal rate cut.

The next CBRT Inflation Report is scheduled for August 13 and will allow the bank to reassess its projections after the July oil-price increase and new domestic inflation data.

Conclusion

Türkiye enters the July 23 meeting with conflicting signals. Annual inflation has declined to 32.11%, but services are rising by almost 40% and rents by almost 48%, while underlying inflation measures remain unstable.

Oil’s return to approximately $94–95 a barrel has increased risks to import costs, the external balance and the lira. Economists therefore overwhelmingly expect the one-week repo rate to remain at 37%.

The actual degree of monetary tightness is better measured through both the formal rate and the weighted average funding cost, which remains close to 40%.

As International Investment experts report, the expected July pause would not signal a permanent end to the easing cycle. It would show that the CBRT is unwilling to cut rates while oil, inflation expectations and the lira create renewed upside risks. Limited easing may resume later in 2026, but it could begin with a return of bank funding from around 40% toward the 37% weekly repo rate.