CBRT Kept Key Rate Constant at 37% Due to Inflationary Risks
Bottom Line: Central Bank of Turkiye (CBRT) held the policy rate constant at 37% during the MPC meeting on April 22 due to inflationary risks as the economy remains under pressure from Iran war, which sparked a surge in energy, transportation and agricultural input costs. We think fragile cease-fire in Iran allowed the CBRT to refrain from tightening this time. Our end-year key rate prediction remains at 32.0% for 2026 while the CBRT will likely remain in a wait‑and‑see mode before taking rate decisions in the near term.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2015 – March 2026
Source: Continuum Economics
Despite the deceleration trend in inflation continued moderately in March supported by lagged impacts of previous monetary tightening, tighter fiscal measures and relative TRY stability, Central Bank of Turkiye (CBRT) held the policy rate constant at 37% on April 22 due to inflationary risks as the economy remains under pressure from regional friction involving Iran, which sparked a surge in energy, transportation and agricultural input costs. We think fragile cease-fire in Iran allowed the CBRT to refrain from tightening this time.
In its written MPC statement, the CBRT said energy prices remain elevated and exhibit notable volatility amid geopolitical developments and the resulting uncertainties. "The effects of these developments and domestic energy prices on the inflation outlook through the cost channel and economic activity are being closely monitored," the statement read.
It appears the ongoing conflict involving Iran remains a primary determinant for the Turkish economy. To stabilize the lira (TRY), the CBRT has implemented an aggressive liquidity strategy, providing market funding at 40% and effectively bypassing its 37% benchmark rate.
Although the two-week truce between the U.S. and Iran was scheduled to expire on April 21, President Trump announced an extension of the ceasefire at the request of Pakistani mediators. Despite the truce remains technically in effect, the situation remains volatile and fragile; and this continued instability poses a threat to the Turkish economy particularly given the country’s heavy reliance on energy imports.
We believe that the CBRT will approach interest-rate adjustments with caution on a meeting-by-meeting basis due to Iran conflict. Under these circumstances, both geopolitical uncertainties and domestic dynamics remain significant risk factors for the inflation outlook. Our end-year key rate prediction remains at 32.0% for 2026.