Turkey's Central Bank Holds Rates at 37% as Inflation Eases to 30.9%

TL;DR: The Central Bank of Turkey left its one‑week repo rate unchanged at 37% as annual consumer price inflation fell to 30.9% in March. The bank said it will add macroprudential tools if credit or deposit markets show unexpected stress.

Context: Turkey’s monetary policy committee met on April 22 and maintained the one‑week repo rate at 37%, the overnight lending rate at 40% and the overnight borrowing rate at 35.5%. The bank reiterated that the tight stance will remain until price stability is reached, aiming to strengthen disinflation through demand, exchange‑rate and expectation channels. It warned that any significant and persistent deterioration in the inflation outlook could trigger further tightening.

Key Facts: Annual inflation eased to 30.87% in March from 31.53% in February, while monthly inflation dropped to 1.94% from 2.96%. The policy rate has been held at 37% since January 2026 after a series of cuts from a peak of 50% in late 2024. In case of unanticipated developments in credit and deposit markets, the bank pledged to support the monetary transmission mechanism with additional macroprudential measures.

Market Reaction: The BIST 100 index slipped 1.2% to 9,850 points, reflecting investor caution over prolonged high rates. The USD/TRY exchange rate edged up 0.8% to 34.50 lira per dollar, indicating modest lira pressure. Major Turkish banks showed mixed moves: Garanti BBVA (GARAN.IS) fell 0.6% to a market cap of $12.5 billion, while Akbank (AKBNK.IS) rose 0.4% to $10.8 billion.

What It Means: By keeping rates at 37%, the central bank continues to suppress demand‑side inflation pressures while relying on a stronger lira to curb import‑led price rises. The bank’s willingness to deploy macroprudential tools suggests it is prepared to address potential credit‑market stress without altering the policy rate. Inflation’s gradual decline may allow a pause in tightening, but any rebound in energy prices or wage growth could test the disinflation path.

What to watch next: Markets will monitor the next inflation release for signs of a sustained move toward the 5% medium‑term target and any signals of additional macroprudential actions from the bank.