Turkey: Central Bank leaves rates unchanged in April
Central Bank stands pat amid external uncertainty: At its meeting on 22 April, the Central Bank of the Republic of Turkey (TCMB) kept its 1-week repo rate on hold at 37.00% for a second consecutive meeting, following 900 basis points of rate cuts from June 2025 to January 2026. The decision was in line with market expectations.
Elevated inflation and geopolitical uncertainty drive hold: The TCMB held rates as it continues to assess the impact of its aggressive easing cycle against a backdrop of still-elevated inflation, which stood at 39% in March. The U.S.-Iran war and the subsequent spike in energy prices add meaningful upside risk to Turkey’s inflation path, reinforcing the case for a pause. The Bank has also been working to rebuild its foreign exchange reserves, which were drawn down to defend the lira in the wake of the conflict, and it appears likely to wait for external risks to ease before resuming its easing cycle. At the same time, the TCMB refrained from hiking due to concerns over a slowdown in economic activity.
Easing cycle likely to resume this year: The Central Bank gave no specific forward guidance on future interest rate changes; however, all of our panelists expect the TCMB to resume cutting rates later this year. The spread among panelists’ end-2026 forecasts is large, though, reflecting uncertainty over the outlook for inflation. Higher-than-expected inflation poses an upside risk.