Turkey's central bank seen cutting policy rate to 35-36% by year-end

September 13, 2026 at 08:59 AM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

Turkey's central bank is expected to cut its policy rate once or twice by end-2026, with markets pricing a decline to 35-36% from the current 37%. The bank kept the rate unchanged in September, extending its cautious stance after a 3-point cut in effective funding costs in late August.

Key Facts

Turkey's central bank kept its policy rate at 37% in September, in line with market expectations.
Markets are pricing the policy rate to fall to 35-36% by end-2026.
The central bank's return to one-week repo auctions in late August lowered effective funding costs by 3 percentage points.
The government's medium-term program raised 2026 and 2027 year-end inflation forecasts by 12.4 and 12 percentage points respectively.
The 5% economic growth target was postponed by one year to 2029.

Rate Decision

Turkey's central bank left its policy rate unchanged at 37% in September, matching the majority market expectation. The bank's return to one-week repo auctions in late August had already delivered a 3-point cut in effective funding costs. Markets now anticipate one or two cuts in the policy rate before the end of the year. The policy rate is priced to decline to 35-36% by end-2026. A possible rate cut was postponed to the October and/or December meetings.

Inflation Outlook

The medium-term program raised year-end inflation forecasts for 2026 and 2027 by 12.4 and 12 percentage points respectively. The single-digit inflation target was postponed from 2027 to 2029. Annual inflation has fallen by about 35 percentage points since May 2024. The disinflation process has not followed the targeted path due to global shocks and delays in structural reforms and public finance contributions.

Growth and Current Account

The medium-term program revised economic growth forecasts downward and current account deficit forecasts upward. The 5% growth target was postponed by one year to 2029. Geopolitical risks, global trade uncertainties, and tight monetary policy continue to pressure economic activity.