War shadow over Central Bank interest rate decision: Interest rates of Turkey and countries in the conflict zone compared

The Central Bank of the Republic of Turkey (TCMB) announced after today's Monetary Policy Committee meeting that it has kept the policy rate steady at 46 percent. The overnight borrowing rate was also maintained at 44.5 percent.

Recently increasing geopolitical risks, and especially the hot conflict between Iran and Israel, had caused the Central Bank's decision to be awaited with curiosity.

In the press release published by the TCMB, it was stated, "The possible effects of geopolitical developments and increasing protectionism in global trade on the disinflation process are being closely monitored. Inflation expectations and pricing behaviors continue to be a risk factor for the disinflation process."

TENSION HAS INFLUENCED DECISIONS

The tension escalating in the Middle East in recent weeks is affecting not only security policies but also economic decisions. Turkey's implementation of a high interest rate has become a subject of debate in economic circles when compared to the interest rates in countries in the middle of war.

In Iran, one of the countries in the shadow of war, an interest rate of 23 percent has been applied since January 2025. Israel, on the other hand, has drawn attention with an interest rate of 4.5 percent since January 2024. Although both countries are in a hot conflict environment, they remain at levels well below the interest rate applied by Turkey.

In Russia, one of the parties to the Russia-Ukraine War, the interest rate, which was 21 percent between October 2024 and May 2025, was reduced to 20 percent as of June 2025. In Ukraine, an interest rate of 15.5 percent has been applied since March 2025. These data show that countries under war conditions prefer lower interest rates in their monetary policies compared to Turkey.

Economic experts state that high inflation and deteriorated inflation expectations in Turkey have pushed the Central Bank to act cautiously. However, at a time when geopolitical risks are increasing, the fact that countries at war manage their economies with lower interest rates is leading to a re-evaluation of Turkey's monetary policy choices.