Most recent posts from Türkiye

The CBRT again kept the policy rate and the interest corridor unchanged at 37% and 35.5%-40%, broadly in line with market expectations. This marks the fifth consecutive month in which funding has continued through the overnight lending rate (40%).

Despite the drag from the conflict, we expect GDP growth to reach around 2.5% in the first half of 2026. Under our baseline scenario of gradually normalizing energy prices and a prudent policy mix, we maintain our 2026 GDP growth forecast at 3.0%.

Consumer inflation rose 1.0% m/m in June, in line with our expectations, bringing annual inflation down to 32.1%. Despite lower energy prices and the postponement of the SCT hike on fuel, the unexpected July hike in health examination fees reduces the limited downside risk to our 30% year-end inflation forecast.

After stagnant GDP growth in 1Q26, economic activity remains weak in 2Q26, partly reflecting the impact of the war. We forecast GDP growth of 3.0% in 2026, but uncertainty surrounding the peace process and the commitment of the current policy mix to disinflation continues to cloud the outlook.

We expect the disinflation process to remain broadly on track against a softer growth backdrop in the short term. Persistent inflationary pressures and external uncertainties warrant a more cautious policy outlook, while selective easing is likely to continue within an overall restrictive policy mix.

The CBRT kept rates unchanged and signaled a further reliance on macroprudential measures. Despite some moderation in demand conditions and favorable seasonal factors on inflation, domestic and external uncertainties continue to pose challenges to the disinflation process.

The Turkish economy grew by 2.5% y/y in 1Q26, in line with our expectations, but continued to lose momentum on a quarterly basis. The prolonged conflict and tight financial conditions pose downside risks to the growth outlook, while the deteriorating external balance is reducing the room for supportive measures.