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The Central Bank of the Republic of Türkiye (CBRT) cut its policy rate by 100 basis points to 36% on Thursday, resuming monetary easing for the first time since its January meeting after months of uncertainty over the economic fallout from the Iran war.
The decision follows a period of caution as policymakers weighed easing inflation against risks from volatile energy prices and capital outflows amid geopolitical tensions.
The bank previously held its benchmark rate at 37% at its September meeting for a fifth consecutive meeting.
In its press release, the central bank maintained a cautious tone despite the cut, warning that geopolitical tensions and elevated energy prices continue to threaten the disinflation process.
"The Committee reiterated that it remains highly attentive to upside risks on inflation," the bank said, highlighting concerns that higher energy costs could put renewed pressure on prices.
Oil prices extended their rise on Thursday, with international benchmark Brent climbing over 3% to $112 per barrel before paring back some gains.
Continued attacks by Yemen's Houthis on Saudi energy infrastructure, shipping traffic disruptions in the Strait of Hormuz and reports of potential fresh U.S.-Israel attacks on Iran further raised supply fears across the markets.
While the central bank noted that recent inflation data and leading indicators point to a slowdown in underlying inflation, it also stressed that the effects of geopolitical developments on costs, economic activity and inflation expectations remain under close scrutiny.
The bank left the door open to tightening monetary policy again if price pressures worsen, warning that "in case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened."
The decision also follows a September market rout triggered by several investment funds failing to meet investor redemption requests amid a liquidity crunch.
The turmoil prompted the Capital Markets Board (SPK) to initiate the liquidation of 131 funds managed by seven portfolio management companies, with the process to be completed within six months.
The liquidation affected more than 455,000 investors, with the funds’ combined assets estimated at around ₺936.3 billion ($19.1 billion) at the time.
The central bank moved to ease liquidity pressures by increasing funding through one-week repo auctions to ₺300 billion and raising banks’ borrowing limits in the interbank money market tenfold. CBRT Governor Fatih Karahan said earlier this month that the turmoil posed no systemic risk and that the bank was prepared to take further action if necessary.
He later told the IMF and World Bank annual meetings in Bangkok last week that proactive measures had limited spillover risks and that fund outflows had not materially weakened residents’ preference for lira-denominated assets.
Karahan said the downturn could weaken the wealth effect, which had been supporting demand and contributing to inflationary pressures. However, he said the impact on economic activity was likely to remain limited, as real-sector companies held only a small share of the funds and most had strong liquidity positions.
Meanwhile, central bank data released Thursday showed that gross international reserves fell 1.4% week over week to $169.1 billion in the week ending Oct. 16. Net international reserves dropped by $6.2 billion from the previous week to $51.5 billion as of Oct. 16.
Compared with pre-turmoil levels, gross international reserves fell by $9.6 billion, while net international reserves dropped by $10.7 billion over the five-week period.
The CBRT’s next Monetary Policy Committee meeting is scheduled for Dec. 10, 2026.
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