Turkey's Central Bank Cuts Its Policy Rate to 36%
By Asymmetric Analytics
Analysis
The Central Bank of the Republic of Türkiye lowered its one-week repo rate from 37% to 36% on October 22, saying the underlying trend of inflation is slowing. Annual inflation was 29.73% in September, so the policy rate still sits about six points above it.
The Central Bank of the Republic of Türkiye (CBRT) announced the move in press release 2026-45 . Its policy rate is the one-week repo auction rate: the price at which it lends to banks for a week against collateral. That price anchors what banks pay for funds, and from there what they charge borrowers and offer savers.
What changed
All three of the CBRT's main rates fell by one percentage point, according to the release:
Policy rate: 37% to 36%.
Overnight lending rate, the ceiling banks pay to borrow overnight from the central bank: 40% to 39%.
Overnight borrowing rate, the floor it pays on banks' overnight deposits: 35.5% to 34.5%.
The committee had held the policy rate at 37% at its September 10 meeting .
The CBRT said the underlying inflation trend was slowing, named elevated energy prices as an upside risk to inflation and said the size and timing of further steps would be decided meeting by meeting, according to press release 2026-45 .
Why a cut can still be tight
September consumer prices were 29.73% higher than a year earlier, according to TurkStat data in the CBRT's inflation table . Subtracting that figure from the 36% policy rate gives 6.27 percentage points (AA calculation). This backward-looking spread is one indicator of policy tightness, not the real return on a bank deposit. A saver's purchasing-power return depends on the deposit rate, taxes and fees, and inflation over the same holding period. Expected inflation also matters for borrowing and saving decisions.
The CBRT's August forecast put inflation at 28% at the end of 2026, 15% at the end of 2027 and 9% at the end of 2028, according to the Inflation Report 2026-III presentation . Its medium-term target is 5%, per the bank's Monetary Policy for 2026 . So the bank is cutting as inflation falls, while keeping the rate above it.
Worth knowing: in 2005 Türkiye redenominated its currency, replacing one million old lira with one new lira, according to the CBRT's history page .
The causal chain
The CBRT says the underlying inflation trend is slowing, and it cut the policy rate and both overnight rates by one percentage point. The bank presented its inflation assessment as the reason; what the cut will do is not yet known.
Conditional (not yet observed):
Credit and demand. If banks pass the cut through to loan rates, borrowing becomes slightly cheaper and domestic demand, which the bank describes as weak, gets modest support.
The lira. Other things equal, lower lira deposit rates can reduce their appeal relative to foreign-currency assets. The effect depends on expected inflation, foreign interest rates and exchange-rate expectations; this article measures none of those responses.
Energy. The bank names elevated energy prices as an upside risk. If oil and gas prices rise further, inflation would slow less and the room for cuts would narrow.
This article measures no market reaction, and none of this involves digital assets.
What we're watching
The CBRT's calendar lists the next rate decision on December 10. Before then come October inflation in early November and Inflation Report 2026-IV on November 12, which will show whether the bank keeps its 28% year-end forecast. Our assessment: renewed inflation pressure could limit further cuts, though it would not mechanically decide the next move.
Sources
Press Release on Interest Rates 2026-45 , Central Bank of the Republic of Türkiye, October 22, 2026.
Press Release on Interest Rates 2026-38 , CBRT, September 10, 2026.
Inflation data , CBRT (TurkStat CPI).
Inflation Report 2026-III presentation , CBRT, August 13, 2026.
Monetary Policy for 2026 , CBRT.
Calendar , CBRT.
History , CBRT.
