Central Bank to announce interest rate decision: Economists expect rates to remain steady at 37 percent

The Central Bank of the Republic of Turkey (CBRT) Monetary Policy Committee (MPC) will announce its fifth interest rate decision of the year on Thursday, July 23. Market expectations are concentrated on the policy rate being maintained at its current level.

The CBRT lowered the policy rate from 38 percent to 37 percent in January and has not made any changes in the subsequent four meetings. All 20 economists participating in the Bloomberg survey predicted that the interest rate would be kept steady at 37 percent in the July meeting. All 16 economists in the AA Finance survey shared the same expectation.

The policy rate expectation of 65 participants from the real and financial sectors who provided their views in the Central Bank's July 2026 Survey of Market Participants was also recorded as 37 percent.

INFLATION EXPECTATION HAS RISEN

The inflation outlook is also being closely monitored ahead of the interest rate decision. In the Survey of Market Participants, the consumer inflation expectation for the current year-end rose from 29.14 percent in the previous period to 29.21 percent.

According to the latest data released by the Turkish Statistical Institute, inflation in June was 0.99 percent monthly and 32.11 percent annually. The economic administration's annual inflation target for the end of 2026 is 5 percent. This picture shows that the gap between targets and realized rates persists.

In terms of monetary policy, not only the policy rate but also the Central Bank's funding method is significant. While the CBRT's one-week repo auction rate is at 37 percent, the overnight lending rate is applied at 40 percent, and the overnight borrowing rate is at 35.5 percent.

The Bank had temporarily suspended weekly repo auctions on February 28, citing developments in financial markets. During this process, funding has been provided to banks via the overnight interest rate, and some market commentators evaluate this practice as a "covert interest rate hike."

Evaluations regarding the inflation trend, domestic demand, and financial conditions in the MPC decision text will be the focus of the markets. In addition to the interest rate decision, potential signals regarding when the CBRT will return to weekly repo auctions will also be followed.

News Source: 12punto