Summary of the Monetary Policy Committee Meeting (2026-32)
No: 2026-32
July 30, 2026
Summary of the Monetary Policy Committee Meeting
Meeting Date: July 23, 2026
Global Economy
1. As a result of the growing uncertainty amid geopolitical developments, energy prices started trending up again. The duration and extent of uncertainties regarding energy supply, supply chains, and transport costs will continue to be decisive for the future trajectory of energy prices.
2. Due to geopolitical developments, growth forecasts for 2026 regarding the Middle East and Africa continued to be revised downward. On the other hand, growth rates are expected to recover in 2027, supported by favorable base effects. Accordingly, the weak and fragile outlook is expected to continue globally, and the global growth index, which is weighted by the export shares of Türkiye’s foreign trade partners, is projected to increase annually by 1.7% and and 2.5% for 2026 and for 2027, respectively.
3. Due to the volatility in commodity prices, upside risks to global inflation persist. While central banks remain vigilant about these risks, they also take into account the unfavorable effects of these developments on growth and employment. The policy rate pricing suggests that expectations of rate hikes have been maintained in advanced economies. The persistence of the supply shock caused by geopolitical developments and the degree to which it will disrupt inflation expectations are key considerations for the course of global monetary policy. Recently, increased uncertainty and fluctuations in risk appetite have led to capital outflows from emerging stock markets, with downside risks to portfolio flows remain elevated at the same time.
Monetary and Financial Conditions
4. The average four-week growth rate of retail loans rose to 2.7% in the June 12- July 17 period on the back of the acceleration in general-purpose loans. The average four-week growth rates of Turkish lira (TRY) commercial loans remained unchanged at 2.4% and that of foreign currency (FX) commercial loans adjusted for exchange rates rose to 0.7%.
5. TRY deposit rates decreased by 81 basis points compared to the week ending June 12, and stood at 46.7% as of the week ending July 17. In the same period, TRY commercial loan rates (excluding overdraft accounts and credit cards) dropped by 339 basis points to 48.9%. General- purpose loan rates (excluding overdraft accounts) rose by 104 basis points to 65.0%, housing loan rates increased by 151 basis points to 41.2%, and vehicle loan rates, following a volatile trend, declined by 190 basis points to 47.3%.
6. The Central Bank of the Republic of Türkiye (CBRT) decided to take simplification steps in the reserve requirement regulation to strengthen macro financial stability and support the monetary transmission mechanism. Accordingly, the additional Turkish lira reserve requirement ratio for FX deposits/participation funds, which was introduced in 2023, and applied at 2.5%, was terminated. In addition, foreign currency deposits/participation funds’ reserve requirement ratios applied to demand deposits and deposits with maturities up to 1 month and with longer maturities at different levels were increased by 2 percentage points to 32 percent and 28 percent, respectively.
7. The gross international reserves of the CBRT have increased by USD 8.4 billion since June 12 and reached USD 160.5 billion as of July 17. Since June 10, Türkiye's five-year credit default swap (CDS) premium has edged down to 240 basis points as of July 22. Compared to June 10, the one-month implied exchange rate volatility of the Turkish lira receded to 5.7%, and the 12-month implied exchange rate volatility of the Turkish lira declined to 18.6% as of July 22. Since the previous MPC meeting week through July 17, net portfolio inflows totaled USD 3.8 billion, comprising USD 3.2 billion to the Government Domestic Debt Securities (GDDS) market and USD 0.6 billion to the stock market.
Demand and Production
8. In May, the retail sales volume index recorded a monthly increase of 2.4% and a quarterly increase of 1.3%. The monthly and quarterly increases in retail sales excluding gold became 1.9% and 1.8%, respectively. In the same period, the trade sales volume index edged up by 0.7% month-on-month but declined by 1.1% quarter-on-quarter. In May, the services production index dropped by 0.4% on a monthly basis and by 0.1% on a quarterly basis. In the second quarter, card spending declined compared to the first quarter. Despite the fall in May, sales of major appliances increased on a quarterly basis. As for automobile sales, the decline recorded in the first quarter continued into the second quarter. The second quarter survey data for manufacturing firms point to a moderate rise in registered domestic market orders and a slight decline in expected domestic market orders for the future. Data for July suggest a decline both in the registered domestic market orders and expected domestic market orders for the future. To sum up, the recent data confirm the ongoing weakening in domestic demand.
9. In May, the industrial production index decreased by 2.9% month-on-month when adjusted for seasonal and calendar effects, and remained flat year-on-year when adjusted for calendar effects. On a quarterly basis, industrial production increased by 2.6% as of May in the second quarter. When typically volatile sectors, such as other transportation and similar sectors, are excluded to monitor the underlying trend, industrial production recorded an increase close to the headline index on a quarterly basis. Accordingly, the underlying trend of industrial production showed improvement. Data from the business tendency survey for June and July point to an increase in production volume expectations for the next three months. The capacity utilization rate remained flat in the second quarter; however, excluding the volatile petroleum sector, capacity utilization recorded a slight increase. Meanwhile, the capacity utilization rate decreased somewhat in July. As of May, the index of production in construction fell by 3.8% in quarterly terms in the second quarter, and by 2.6% compared to the same period of the previous year.
10. In May, seasonally adjusted employment stood at 32.5 million people, a slight decline compared to the previous quarter average. In this period, the labor force participation rate decreased by 0.1 percentage points quarter-on-quarter. With the declines in employment and the participation rate largely offsetting each other, the unemployment rate remained flat at 8.2% on a quarterly basis. Survey indicators suggest that the outlook lagging behind historical averages for manufacturing firms' future employment expectations persisted.
11. The current account balance ran a monthly deficit of USD 1.5 billion in May. The 12-month cumulative current account deficit increased by USD 0.4 billion month-on-month and stood at USD 37.3 billion. Travel revenues stood at USD 4.9 billion on a monthly basis and USD 60.1 billion in 12-month cumulative terms. The services balance surplus remained robust at USD 62.5 billion.
12. In June, seasonally adjusted exports went down while imports rose. On an annual basis, imports and exports saw strong increases due to calendar effects. Against this background, the 12-month cumulative foreign trade deficit increased compared to the previous month. In June, gold imports stood at USD 1.4 billion, and declined to USD 20.9 billion in 12-month cumulative terms. According to the current data, the 12-month cumulative current account deficit is projected to widen in June. The negative impact of recent geopolitical developments on the current account deficit is expected to be largely shaped by the course of energy prices. Seasonally adjusted imports of consumption goods were down on a quarterly basis in the second quarter of the year as well. When provisional foreign trade data for June are considered along with the high-frequency leading data for July, the three-month average trends point to a flat course in exports and imports and a limited increase in the foreign trade deficit compared to the second quarter of the year.
13. Regarding the financing of the current account deficit, the banking sector’s 12-month cumulative long-term debt rollover ratio stood at 152.6% in May. In the non-bank corporate sector, this ratio was 222.1%. Accordingly, external financing opportunities remain at high levels.
Inflation Developments and Expectations
14. Consumer prices increased by 0.99% in June, and annual inflation edged down by 0.50 percentage points to 32.11%. On a monthly basis, energy prices declined in June, while price increases across the main groups slowed compared to the previous month. In this period, annual inflation decreased in energy and services, but edged up in other main groups. The annual rate of change went down by 0.12 percentage points to 31.18% in the B index (CPI excluding energy, unprocessed food, alcoholic beverages-tobacco and gold) and was down by 0.60 percentage points to 29.84% in the C index (CPI excluding energy, food and non-alcoholic beverages, alcoholic beverages-tobacco and gold).
15. Compared to the previous month, the contributions of energy and services groups to annual consumer inflation decreased by 0.37 and 0.21 points, respectively, whereas those of alcohol-tobacco-gold and core goods groups edged up by 0.06 and 0.02 points. Meanwhile, the contribution of food and non-alcoholic beverages remained unchanged.
16. In June, the monthly decline in energy prices was driven by lower fuel prices amid the fall in international oil prices, despite the rise in electricity and natural gas prices. In this period, the moderate course of food prices was steered by the unprocessed food subgroup which saw a decrease in its prices led by vegetables, whereas monthly inflation in processed food remained elevated. On the other hand, prices in the alcoholic beverages and tobacco group posted a rise, most notably driven by price increases in tobacco products made by producer firms. Monthly services inflation decelerated as the increase in transport services prices remained limited due to the decline in fuel prices. In the core goods group, promotional sales led to a drop in the prices of the clothing and footwear subgroup, which were markedly affected by the launch of the new season over the previous two months, while, prices remained relatively moderate in the durable goods.
17. The underlying trend of inflation decreased slightly in June. Seasonally adjusted monthly inflation was down both in the B and C indices compared to the previous month. Among the components of the B index, price increases were relatively flat in core goods and processed food but weakened in services. Meanwhile, the deceleration in distribution-based underlying inflation indicators remained relatively low. The indicators monitored by the CBRT increased to a limited extent in terms of three-month averages.
18. As of June, seasonally adjusted inflation based on three-month averages registered a decline in the services sector compared to the previous month while rising in core goods. This is attributable to the other core goods items with strong links to petrochemical products which have been significantly affected by the war.
19. The prevalent price-setting behavior in the services sector leads to significant inertia and causes the impact of shocks on inflation to extend over a long period of time, and services inflation remains higher than goods inflation. As of June, annual goods inflation was around 28%, while services inflation hovered around 40%. Among subgroups, annual inflation rose somewhat in the communication group, while it remained nearly flat in restaurants-hotels and receded in other subgroups. Transportation services prices, which recorded sharp monthly increases in the recent period, rose slightly in June, by 0.58%, due to the decline in fuel prices. In this period, air passenger transportation fares dropped. Monthly rent inflation stood at 2.66%, also driven by seasonal increases in contract renewal rates. Meanwhile, annual rent inflation declined by 1.90 points to 47.87%. In this period, monthly inflation in restaurants-hotels (2.11%) increased due to seasonal effects, partly driven by accommodation services, while inflation in communication group (1.60%) remained at a rate similar to the previous month.
20. In June, domestic producer prices rose by 1.80%, while annual producer inflation decreased by 0.84 percentage points to 28.09%. When examined by main industrial groupings, the rate of increase in energy prices continued to stand out, despite slowing compared to the previous month. Meanwhile, the monthly price increase in durable consumption goods remained limited at 0.24%. On a sectoral basis, crude oil and natural gas, coal and lignite, electricity and gas, and tobacco products were the subgroups with relatively high price increases.
21. In June, international commodity prices declined, more significantly in the energy sector. In line with this, the FAO Food Price Index edged down in June, led by declines in sugar and cereal prices. Meanwhile, oil prices were on the rise. As of the first three weeks of July, agricultural commodity prices rose, and energy commodity prices resumed their upward trend amid escalating geopolitical tensions. Crude oil prices remained highly volatile. Having decreased in June, Brent crude oil prices reached USD 92 as of the third week of July. Similarly, the Title Transfer Facility (TTF) natural gas prices rose over the same period of July following the decline in June. Gold prices continued their downward trend in the recent period. Disruptions in the flow of energy and raw materials, primarily caused by uncertainties regarding geopolitical developments, drive up production costs and pose a risk of inflationary pressures on a global scale.
22. The Global Supply Chain Pressure Index, which stood well above its historical average in April and May due to geopolitical developments, moderated in June but remained at a relatively elevated level. Risks related to the Strait of Hormuz persist, and global freight rates are unfavorable. Container price indices for the global market and China have been rising since March. Dry cargo shipping costs have been volatile in July after recording a decline in June. On the other hand, the basket exchange rate maintained its mild trend as of the first three weeks of July, thereby limiting cost pressures to some extent. Seasonally adjusted manufacturing industry PMI data for June pointed to a decrease in price and input indices but also signaled a partial improvement in delivery times.
23. Inflation expectations of market participants rose slightly in July. According to the results of the Survey of Market Participants, the year-end inflation expectation for 2026 increased by 0.1 percentage points to 29.2%, and that for 2027 went up by 0.1 percentage points to 21.5%. The 12-month-ahead inflation expectation was revised up by 0.2 percentage points to 24.0%, while the 24-month-ahead inflation expectation was down by 0.5 percentage points to 17.8%. Meanwhile, the five-year-ahead inflation expectation fell by 0.4 percentage points to 11.5%. As for the expectations of the real sector, the 12-month-ahead inflation expectation of firms remained flat in June, standing at 33.1%. In the same period, the 12-month-ahead inflation expectation of households decreased by 3.4 percentage points to 46.1%. Inflation expectations and pricing behavior continue to pose risks to the disinflation process.
24. Leading indicators suggest that the underlying trend of inflation will rise temporarily in July. Seasonally adjusted monthly services inflation has been increasing, led by prices in healthcare. The medical examination copayment adjustment made in the SGK’s (Social Security Institution) Communiqué on Healthcare Practices is projected to add 0.22 percentage points to monthly consumer inflation in July. In addition, the impact of the rise in the Turkish Medical Association’s price tariffs on healthcare prices will also be observed in July. Despite some monthly pick-up in rent inflation due to seasonal effects in contract renewal rates, the slowdown in annual rent inflation is expected to continue. In core goods, the seasonal sales in clothing and footwear in July are projected to be lower than the previous year. Monthly inflation in durable consumption goods is expected to rise slightly due to developments in white goods and furniture prices. While unprocessed food prices increased due to vegetable prices, there has been a slowdown in processed food inflation. When the leading data for the food group are evaluated as a whole, they point to a rise in the group’s annual inflation. Global energy prices have started to climb again due to the recent geopolitical developments. Therefore, domestic energy prices, which decreased in May and June, are projected to rise again in July on a monthly basis, driven by fuel and electricity prices. Electricity prices are expected to climb due to the market clearing price as well as the End-Source Supply Tariff as a result of the Renewable Energy Resources Support Scheme developments. While the decision not to implement the lump-sum tax adjustment implied by the six-month increase in the D-PPI for fuel prices in July is a positive development, crude oil prices, which have resumed an upward trend, and the gradual phase-out strategy from the sliding scale system coinciding with this uptrend are negatively affecting the inflation outlook. Prices of alcoholic beverages have been rising in July, partly due to the lump-sum tax adjustment. It is estimated that the upward impact on inflation from reducing the ad valorem SCT rate on tobacco products while raising the lump-sum tax rate will be observed in August. The effect of the recently announced additional customs duties on consumer inflation is expected to be quite limited, as the share of the covered products in total imports and consumption is rather low. The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored.
Monetary Policy
25. The Monetary Policy Committee (the Committee) has decided to keep the policy rate (the one-week repo auction rate) at 37 percent. The Committee has also maintained the Central Bank overnight lending rate and the overnight borrowing rate at 40 percent and 35.5 percent, respectively.
26. The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels. The Committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets. Monetary policy decisions are made prudently on a meeting-by-meeting basis with a focus on the inflation outlook. In case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened. The Committee reiterated that it remains highly attentive to upside risks on inflation.
27. In case of unanticipated developments in credit and deposit markets, monetary transmission mechanism will be supported via additional macroprudential measures. Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively.
28. The Committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5 percent inflation target in the medium term. The Committee will make its decisions in a predictable, data-driven and transparent framework.