Summary of the Monetary Policy Committee Meeting (2026-24)
No: 2026-24
June 18, 2026
Summary of the Monetary Policy Committee Meeting
Meeting Date: June 11, 2026
Global Economy
1. Amid geopolitical developments and the resulting uncertainties, energy prices remain volatile and elevated. 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 continued to be revised downward in many economies, particularly those in the Middle East and Africa. 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, has been revised somewhat downward for 2026 and upward for 2027 compared to the previous MPC period and is projected to increase annually by 1.7% and 2.5%, respectively.
3. Rising commodity prices have heightened risks to global inflation. 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 strengthened 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 a volatile course in capital flows to 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 declined to 2.1% in the April 24-June 5 period. This decline was driven by the deceleration in general-purpose and housing loans. The average four-week growth rates of Turkish lira (TRY) commercial loans and foreign currency (FX) commercial loans adjusted for exchange rates dropped to 2.4% and 0.4%, respectively.
5. TRY deposit rates increased by 70 basis points compared to the week ending April 24, and stood at 47.7% as of the week ending June 5. In the same period, TRY commercial loan rates (excluding overdraft accounts and credit cards) went up by 76 basis points to 50.5%. General- purpose loan rates (excluding overdraft accounts) rose by 189 basis points to 64.1%, housing loan rates increased by 206 basis points to 39.3%, and vehicle loan rates, following a volatile trend, went up by 643 basis points to 45.9%.
6. In view of loan growth developments, the Central Bank of the Republic of Türkiye (CBRT) introduced changes to the reserve requirement regulation on May 23 to support the tight monetary stance and strengthen macro financial stability. Accordingly, growth limits imposed for eight-week periods were reduced from 4% to 3% in general purpose and vehicle loans extended to consumers, from 2% to 1% in overdraft account limits extended to consumers, from 5% to 4.5% in Turkish lira loans extended to SMEs, and from 3% to 2% in Turkish lira loans extended to non-SME enterprises.
7. The gross international reserves of the CBRT have decreased by USD 11.6 billion since April 24 and stood at USD 159.4 billion as of June 5. Türkiye's five-year credit default swap (CDS) premium has increased slightly since April 21 to 241 basis points as of June 10. Compared to April 21, the one-month implied exchange rate volatility of the Turkish lira decreased to 7.4%, the 12-month implied exchange rate volatility of the Turkish lira declined modestly to 20.9% as of June 10. Since the previous MPC meeting week through June 5, net portfolio outflows totaled USD 1.9 billion, comprising USD 0.7 billion of outflows from Government Domestic Debt Securities (GDDS) market and USD 1.2 billion of outflows from the stock market.
Demand and Production
8. In the first quarter of 2026, Gross Domestic Product (GDP) increased by 2.5% year-on-year and by 0.1% quarter-on-quarter. By the production approach, services sector was the primary driver of annual growth in the first quarter. Agricultural value added, which had declined throughout 2025 in annual terms due to the fall in crop production caused by frost and drought, started to increase in the first quarter of 2026. In the same period, industrial value added decreased on an annual basis, while growth in construction sector value added and net tax items decelerated. By the expenditure approach, the positive contribution of private consumption and total investments to annual growth declined slightly compared to the previous quarter. On a quarterly basis, private consumption made a very limited contribution to growth, while the contribution of total investments was negative. Both imports and exports of goods and services registered a decline, while the negative contribution of net exports to quarterly growth continued, albeit to a lesser extent. In sum, first quarter data point to a slowdown in economic activity.
9. In March, the retail sales volume index recorded a monthly increase of 2.6% and a quarterly increase of 5.4%. The monthly and quarterly increases in retail sales excluding gold were lower at 0.9% and 3.1%, respectively. In the same period, the trade sales volume index increased by 1.9% month-on-month and by 1.8% quarter-on-quarter. In March, the services production index increased by 0.5% on a monthly basis and by 1.6% on a quarterly basis. In the second quarter, card spending was weaker as of May compared to the first quarter. Major appliances sales increased in April. As for automobile sales, the decline seen in the first quarter continued into the second quarter as of May. The second quarter survey data for manufacturing firms as of May point to a moderate rise in registered domestic market orders and a decline in expected domestic market orders for the future. Meanwhile, findings from interviews with firms regarding consumption expenditures suggest that the moderate course in domestic sales continued in the second quarter. To sum up, leading indicators for the second quarter suggest a continued weak course in domestic demand.
10. In March, the industrial production index decreased by 0.8% month-on-month when adjusted for seasonal and calendar effects, and by 1.1% year-on-year when adjusted for calendar effects. On a quarterly basis, industrial production remained almost flat in the first quarter. Production in construction-related sectors declined in this period contrary to the headline index. The reason underlying this development is the partial normalization of construction-related production in the first quarter of the year following an acceleration particularly in the second half of last year to meet the target of delivering earthquake housing in 2025. When typically volatile sectors, such as other transportation and similar sectors, are excluded to monitor the underlying trend, industrial production shows a limited decline on a quarterly basis. Accordingly, the underlying trend of industrial production remains still weak. Survey indicators for the manufacturing industry implied a deterioration in forward-looking production expectations in the March-April period due to the war. That said, data from the business tendency survey for May point to a partial recovery in production expectations. Meanwhile, in quarterly terms, production expectations declined as of May compared to the previous quarter. On the other hand, the capacity utilization rate remained almost flat in the second quarter as of May. Excluding the volatile petroleum sector, capacity utilization shows a slight increase. In the first quarter, the index of production in construction fell by 2.7% in quarterly terms and increased by 4.1% compared to the same period of the previous year.
11. In April, seasonally adjusted employment stood at 32.2 million people, down by 0.4% compared to the previous quarter average. In this period, the labor force participation rate decreased by 0.3 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.
12. The current account balance ran a monthly deficit of USD 9.7 billion in March. The 12- month cumulative current account deficit increased by USD 4.8 billion month-on-month and stood at USD 39.7 billion. Travel revenues stood at USD 2.9 billion on a monthly basis and USD 60.4 billion in 12-month cumulative terms. The services balance surplus remained robust at USD 63.1 billion.
13. In May, seasonally adjusted exports and imports registered an uptick. The monthly increase in exports was robust despite the fall in the number of working days due to the religious holiday and the associated administrative leave coupled with the lingering impact of the war. The relatively strong picture in exports is also attributed to the temporary shift of demand towards Türkiye due to the geopolitical developments and elevated logistics costs. Against this background, the 12-month cumulative foreign trade deficit declined compared to the previous month. In May, gold imports saw a slight decline, and stood at USD 21.1 billion in 12-month cumulative terms. According to the current data, the 12-month cumulative current account deficit is projected to narrow in April and May. The negative impact of recent geopolitical developments on the current account deficit is expected to continue over the second half of the year, and the extent of this impact is estimated to vary depending on the duration and severity of these developments. Seasonally adjusted imports of consumption goods edged down in the April-May period compared to the previous quarter. When provisional foreign trade data for May are considered along with the high-frequency leading data for June, the three-month average trends point to an increase in exports and in imports and a limited decline in the foreign trade deficit compared to the first quarter of the year.
14. Regarding the financing of the current account deficit, the banking sector’s 12-month cumulative long-term debt rollover ratio stood at 151.5% in March. In the non-bank corporate sector, this ratio was 213.6%. Accordingly, external financing opportunities remain at high levels.
Inflation Developments and Expectations
15. Consumer prices increased by 1.71% in May, and annual inflation edged up by 0.24 points to 32.61%. In May, the course of consumer prices was largely driven by price developments in transportation services, clothing and processed food. Accordingly, annual inflation increased in the services, core goods and food groups, but decreased in other main groups. The annual rate of change went up by 0.79 points to 31.30% in the B index (CPI excluding unprocessed food, energy, alcoholic beverages-tobacco and gold) and 0.61 points to 30.44% in the C index (CPI excluding energy, food and non-alcoholic beverages, alcoholic beverages, tobacco and gold).
16. Compared to the previous month, the contributions of energy, food and non-alcoholic beverages, and alcohol-tobacco-gold groups to annual consumer inflation decreased by 0.29, 0.12, and 0.03 points, respectively, while the contributions of services and core goods groups increased by 0.40 and 0.28 points, respectively.
17. In seasonally adjusted terms, the monthly increase in consumer prices slowed down compared to the previous month. Prices of transportation services stood out in monthly services inflation, which followed a similar trend to the previous month in seasonally adjusted terms. Reflecting developments in fuel prices, the cumulative price increase in transportation services over the past three months reached to 18.9%. While the rise in clothing and footwear prices had a noticeable impact on core goods inflation, monthly inflation was relatively moderate in other subgroups. The decline in food prices in May was driven by unprocessed food, with vegetable products in the lead. Vegetable prices began to retreat from their high levels recorded in the first months of the year due to unfavorable supply conditions. Meanwhile, despite slowing month-on-month, monthly inflation in processed food remained elevated mainly due to milk and dairy products. Energy prices decelerated slightly in May, driven by fuel prices resulting from the decline in international oil prices.
18. The underlying trend of inflation, which increased in April due in part to higher energy prices, following its rise in the first months of the year, decreased slightly in May. 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 services but weakened in core goods and processed food. When the indicators monitored by the CBRT are evaluated as a whole, the underlying trend of inflation declined in May following the rise in April due to the geopolitical shock. Meanwhile, the indicators showed no significant change in terms of three-month averages.
19. As of May, seasonally adjusted inflation based on three-month averages registered a slight decline in the services sector compared to the previous month while edging up in core goods.
20. 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 May, annual goods inflation was around 28%, while services inflation hovered around 41%. Among subgroups, annual inflation rose in the transportation and communication groups, more markedly in transportation, while it remained nearly flat in restaurants-hotels and receded in rents and other services. In May, the prices of transportation services continued to rise strongly, increasing by 5.61%. This was driven by the religious holiday period as well as the passthrough of fuel price developments. In this group, passenger transportation by air continued to lead price increases, posting a 15.22 % rise, while intercity bus fares went up by 5.46%. During this period, monthly inflation in communication services was relatively flat at 1.69%, while annual inflation in this group kept rising. On the other hand, the monthly price increase in rents was 2.15%, while annual rent inflation fell by 1.39 points to 49.77%. In May, restaurants-hotels inflation slowed to 1.87% compared to the previous month, while the monthly price increase in other services remained relatively modest at 1.14%.
21. In May, domestic producer prices rose by 2.75%, while annual producer inflation increased by 0.34 percentage points to 28.93%. The rising global commodity prices continued to affect producer prices. In this period, energy prices continued to rise significantly, by 6.60%, due to global shock. Thus, the cumulative increase in domestic energy producer prices reached 17% in the last three months. In May, intermediate goods prices rose by 2.94%, while capital goods and durable and non-durable consumption goods saw relatively smaller price increases. On a sectoral basis, there were significant price increases in subgroups that were strongly affected by geopolitical developments, such as natural gas, crude oil, rubber-plastics, and chemical products. While the sliding-scale mechanism limits the rise in consumer prices, producer prices collected excluding taxes are notably affected more by global developments.
22. In May, international commodity prices continued to rise, albeit at a slower pace. While crude oil prices declined in this period, prices for industrial metals and agricultural commodities increased further. As of the first ten days of June, despite the uptrend in metals, the headline commodity index declined due to the falling prices in energy and agricultural commodities. Brent crude oil prices, which had risen significantly in March and April due to geopolitical developments, declined during the following period. Brent crude oil prices, averaging around USD 107.5 in May, decreased to USD 97.9 on average as of the first ten days of June. High volatility in crude oil prices continues. TTF natural gas prices, which rose notably in March similar to Brent crude oil prices, declined somewhat in April but have increased again as of May. The downtrend in gold prices continues. The FAO Food Price Index rose between February and April but declined somewhat in May, led by prices of vegetable oils and dairy products. The uncertainty surrounding recent geopolitical developments has primarily caused disruptions in the flow of energy and raw materials, thereby driving up production costs and raising the risk of inflationary pressures on a global scale.
23. Against this backdrop, the Global Supply Chain Pressure Index continues to rise gradually, pointing to intensifying supply-side pressures. Risks related to the Strait of Hormuz persist amid ongoing geopolitical developments, and global freight rates remain unfavorable. The uptrend recorded in container indices for the global market and China since March remained unchanged during the first ten days of June. Meanwhile, the increases in dry cargo indices that had been ongoing since March gave way to a partial decline during this period. On the other hand, the basket exchange rate remained mild as of the first ten days of June, which limited cost pressures to some extent. Seasonally adjusted manufacturing industry PMI data for May pointed to a decrease in input and price indices, but also signaled a partial improvement in lead times. The CBRT’s field observations also imply that the negative impact of geopolitical developments on supply chains remained limited.
24. Inflation expectations of market participants rose in May. According to the results of the Survey of Market Participants, the year-end inflation expectation for 2026 increased by 1.4 percentage points to 28.9%, and that for 2027 went up by 1.0 percentage points to 21.1%. The 12-month-ahead inflation expectation was revised up by 0.4 percentage points to 23.8%, while the 24-month-ahead inflation expectation was up by 0.4 percentage points to 18.4%. Meanwhile, the five-year-ahead inflation expectation remained flat at 11.9%. As for the expectations of the real sector, the 12-month-ahead inflation expectation of firms decreased by 0.6 percentage points to 33.1% in May. In the same period, the 12-month-ahead annual inflation expectation of households decreased by 2.1 percentage points to 49.5%. Inflation expectations and pricing behavior continue to pose risks to the disinflation process.
25. Leading data suggest that the decline in the underlying trend of inflation continues in June as well. Seasonally adjusted indicators imply that the monthly services inflation will slow down, while core goods inflation will remain relatively flat. While unprocessed food prices decreased due to falling vegetable prices, inflation in processed food has slowed down. Domestic energy prices are projected to remain flat in June. This projection is based on declining fuel prices on the back of the decrease in Brent oil prices despite rising electricity and natural gas prices. As for the services sector, transport services prices, which have recently increased sharply, are expected to follow a mild track in June due to recent drops in fuel prices and the waning of religious-holiday-related effects, while the deceleration in rents is expected to continue. In the core goods group, prices in clothing and footwear sectors, on which strong effects of the transition to the new season were observed in the last two months, are anticipated to increase slightly in June, as the discount season begins. Monthly inflation in durable goods is expected to remain moderate. The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored.
Monetary Policy
26. The Monetary Policy Committee (the Committee) has decided to keep the policy rate (the one-week repo auction rate) at 37%. The Committee has also maintained the Central Bank overnight lending rate and the overnight borrowing rate at 40% and 35.5%, respectively.
27. 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.
28. 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.
29. 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.