Turkiye MPC Preview: Key Rate Will Likely Be Held Constant on April 22 MPC
Bottom Line: We think Central Bank of Turkiye (CBRT) will likely hold the policy rate stable at 37% during the MPC meeting scheduled for April 22 due to inflationary risks as 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.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2018 – 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, we think Central Bank of Turkiye (CBRT) will likely hold the policy rate constant at 37% during the MPC meeting scheduled for 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. (Note: Turkish Statistical Institute (TUIK) announced March inflation figures on April 3 and revealed inflation cooled down to 30.9% y/y in March from 31.5% in February. The moderate slowdown was supported by the sliding tax system and the normalization in food prices after Ramadan).
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. Additionally, fiscal authorities have tempered rising fuel prices by activating a sliding-scale tax system, absorbing costs through reduced Special Consumption Tax (SCT) revenues. These interventions proved effective last month, as TRY depreciated by only 1.3% against the USD in March.
Although the two-week ceasefire between the U.S./Israel and Iran—which began on April 7—and the partial reopening of the Strait of Hormuz have boosted global risk appetite and led to a moderate pullback in oil prices, the truce remains fragile. 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 must approach interest-rate adjustments with caution on a meeting-by-meeting basis throughout 2026. Transitioning sticky inflation from the 30% range down toward 10% will likely be a difficult process; as inflation becomes more entrenched, it necessitates maintaining high interest rates for an extended period. Under these circumstances, both geopolitical uncertainties and domestic dynamics remain significant risk factors for the inflation outlook, and we believe the CBRT must maintain its cautious stance by keeping the policy rate stable on April 22 due to risks.