Summary of the Monetary Policy Committee Meeting (2026-05)

Summary of the Monetary Policy
Committee Meeting
January 29, 2026, No. 2026-05
Meeting Date: January 22, 2026
Global Economy

1. Uncertainties regarding global trade policies have been receding compared to the previous
   MPC period, but geopolitical risks have risen significantly. The moderate improvement trend in global growth forecasts has extended into the current MPC period. Despite reduced uncertainties over trade policies, rising protectionism and recent geopolitical developments keep downside risks to the growth outlook alive. Accordingly, the weak and fragile outlook is expected to continue, and the global growth index, which is weighted by the export shares of Türkiye’s foreign trade partners, is projected to have increased by 2.1% in 2025, followed by a rise of 2.4% in 2026. While the relatively weak course in the global demand outlook and the supply-side developments continue to weigh on crude oil prices, energy commodity prices remain low. On the other hand, non-energy commodity prices continued their uptrend led by industrial and precious metal prices. Geopolitical risks heighten the likelihood of price increases in commodities, particularly in crude oil and precious metals.
2. While risks to inflation remain prevalent globally, central banks continue to cut interest rates
   in light of these risks. Recently, although there has been cross country divergence, fluctuations in risk appetite have led to portfolio outflows from emerging stock markets. Accordingly, global uncertainties and geopolitical developments keep downside risks to portfolio flows alive. Monetary and Financial Conditions
3. Turkish lira (TRY) deposit rates dropped by 95 basis points compared to the week ending
   December 12 and stood at 45.0% as of the week ending January 16. In the same period, TRY commercial loan rates (excluding overdraft accounts and credit cards) decreased by 557 basis points to 40,1%. The decline in general-purpose loan rates, driven by banks' balance sheet adjustments, has turned into an increase. General-purpose loan rates (excluding overdraft accounts) rose by 615 basis points to 64,0%, housing loan rates fell by 137 basis points to 36.3%, and vehicle loan rates fluctuating from time to time went up by 435 basis points to 38,0%.
4. The average four-week growth rate of retail loans increased slightly to 3.4% in the December
   12 – January 16 period. This rise was driven by general-purpose loans and credit cards. While the average four-week growth rate of TRY commercial loans rose to 3.5%, that of foreign currency (FX) commercial loans adjusted for exchange rates remained lower at 1.1%.
5. The gross international reserves of the CBRT increased by USD 14.4 billion since December 12
   and reached USD 205.2 billion as of January 16. Türkiye's five-year credit default swap (CDS) premium declined by around 11 basis points since December 10, standing at 215 basis points as of January 21. While the 1-month implied exchange rate volatility of the Turkish lira reached 8.5% as of January 21, showing a limited rise compared to December 10, the 12-month implied

exchange rate volatility decreased to 18.2%. Since the previous MPC meeting week, net portfolio inflows have totaled USD 3.8 billion, comprising USD 2.6 billion of inflows to the government domestic debt securities (GDDS) market and USD 1.2 billion of inflows to the stock market. Demand and Production
6. In November, the retail sales volume index recorded a monthly increase of 1.5% and a
quarterly increase of 3.0%. Retail sales excluding gold posted a more moderate quarterly growth. In the same period, the trade sales volume index was up by 0.5% on a monthly basis but down by 0.4% on a quarterly basis due to the decline in wholesale trade. The services production index increased slightly in November. On a quarterly basis, the flat trend that started in the second quarter continued in the last quarter of the year as well. Card spending remained on the rise in the final quarter. However, excluding the impact of the recent surge in card usage rate, consumption expenditures were more moderate. White goods sales dropped in November, while automobile sales continued to increase in the last quarter despite the decline in December. Survey data for manufacturing firms point to a rise in registered domestic market orders in the last quarter of the year. In sum, indicators for the last quarter point to demand conditions that continue to support the disinflation process, albeit at a moderating pace.
7. In November, the industrial production index rose by 2.5% month-on-month when adjusted
for seasonal and calendar effects, and by 2.4% year-on-year when adjusted for calendar effects. On a quarterly basis, industrial production declined by 0.7% in the fourth quarter as of November. Excluding typically volatile sectors, such as other transportation and similar sectors, in order to monitor the underlying trend, industrial production posted a more limited decline on a quarterly basis. Survey indicators for the manufacturing industry point to an increase in the sector’s activity in the fourth quarter. In fact, the capacity utilization rate increased moderately by 0.3 percentage points quarter-on-quarter. This upward course also continued in January. The index of production in construction went up by 2.4% in quarterly terms in the last quarter of the year as of November, and by 25.1% compared to the same period of the previous year.
8. In November, seasonally adjusted employment stood at 32.7 million people, increasing by 0.4%
compared to the previous quarter average. In this period, the labor force participation rate increased by 0.2 percentage points quarter-on-quarter, and the unemployment rate edged up by 0.1 percentage points to 8.6%. Survey indicators suggest that the outlook lagging behind historical averages for manufacturing firms' future employment expectations persisted in the fourth quarter of 2025 as well.
9. In November, the current account balance ran a monthly deficit of USD 4.0 billion. The 12-
month cumulative current account deficit increased by USD 1.2 billion month-on-month and stood at USD 23.2 billion. Travel revenues came out at USD 3.9 billion, reaching USD 59.4 billion in 12-month cumulative terms. The services balance surplus remained robust at USD 63.3 billion.
10. In December, seasonally adjusted exports and imports rose. However, the 12-month
cumulative foreign trade deficit increased compared to the previous month. In this period, gold imports, which were boosted by the global increase in gold prices, remained high despite some decline. As of December, gold imports stood at USD 23.1 billion in 12-month cumulative terms. According to the current data, the 12-month cumulative current account deficit is projected to expand in December and January. Seasonally adjusted imports of consumption goods rose in the final quarter. When provisional foreign trade data for December are considered along with

the high-frequency leading data for January, the three-month average trends point to an increase in exports and imports.
11. Regarding the financing of the current account deficit, the banking sector’s 12-month
cumulative long-term debt rollover ratio stood at 184.8% in November. In the non-bank corporate sector, this ratio was 181.0%. Accordingly, external financing opportunities remain at high levels. Inflation Developments and Expectations
12. Consumer prices were up by 0.89% in December annual inflation decreased by 0.18 points to
end the year at 30.89%. The fall in annual consumer inflation was driven by non-food groups while annual inflation in food group rose. The annual rate of change in the B index was down by 0.51 percentage points to 31.66%, whereas that of the C index dropped by 0.57 percentage points to 31.08%. Compared to November, contributions to annual inflation decreased in the core goods, energy, and services groups by 0.25, 0.12, and 0.08 percentage points, respectively; but increased in the food and non-alcoholic beverages, and alcohol-tobacco-gold groups by
0.24 and 0.03 percentage points, respectively. In seasonally adjusted terms, the monthly
increase in consumer prices rose by 0.2 percentage points compared to the previous month.
13. In December, the food group was the main group that stood out with price increase. In this
period, the rise in unprocessed food prices was driven by the rise in red meat and vegetables prices, while the increase in red meat prices was also reflected in processed meat products. In the services group, monthly rent inflation continued to weaken while communication services inflation accelerated. In the core goods group, clothing and footwear prices declined due to seasonal factors, while the monthly price increase in durable consumer goods slowed down. The other core goods inflation rose largely driven by price developments in drugs. In this period, energy prices remained flat.
14. The underlying trend of inflation declined in December. Seasonally adjusted monthly inflation
remained flat in the B and C indices compared to the previous month. Among the components of the B index, price increases did not show a significant change. Meanwhile, distribution-based indicators monitored by the CBRT pointed to a decline in underlying trend of inflation in December. When all these indicators are considered, the underlying trend of inflation fell to 1.9% based on three-month averages.
15. As of December, while the seasonally adjusted average price increase over the last three
months decelerated in core goods (0.97%) compared to the previous month, it remained flat in the services sector (2.88%).
16. 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 the services inflation remains higher than the goods inflation. In 2025, goods inflation was 25%, while services inflation was 44%. In December, rents inflation continued to weaken at 1.65% on a monthly basis, driving the group’s annual inflation down to 61.61%. The rise (1.51%) in the restaurants- hotels sub-group was driven by food services, while the drop in accommodation prices curbed further increase in this group. The monthly price increase of 3.63% in the communication subgroup, driven by rises in phone call and internet charges, became stronger compared to the last four months. Meanwhile, prices in the transport services decreased by 2.66% due to seasonal effects stemming from the decline in passenger transport by air (- 32.95%) and intercity passenger transportation (-4.32%). In this period, price increase in the other services subgroup remained moderate at 0.36%.
17. Leading indicators monitored via the micro data of the Retail Payment System (RPS) suggest
that the monthly rate of rent increase will rise in January due to the seasonal rise in contract

renewal rate. Indeed, seasonally adjusted data imply that the deceleration in monthly rent inflation continues. Thus, the rent inflation remains on the decline. Rates of rent increases in new and renewed contracts obtained from RPS micro data and those monitored through residential property valuation reports are below the current annual inflation in the rent item of the consumer price index (CPI), and continue to decline. However, rent inflation remains higher than projected partly due to supply-side factors such as earthquakes and urban transformation.
18. Domestic producer prices rose by 0.75% in December, bringing annual inflation to 27.67%. In
this period, energy prices declined (-3.63%) while capital goods (1.98%) and intermediate goods (1.61%) stood out with relatively high price increases.
19. In international commodity prices, the decoupling between energy and non-energy groups
continues. While prices in non-energy commodities followed an upward trend, the deceleration in energy prices continued. In December, the overall commodity price index decreased slightly due to energy and agricultural commodity prices, while it increased in January mainly due to industrial metal commodity prices. The rise in gold prices, which remained moderate in November, accelerated again in December and January due to geopolitical developments. The FAO Food Price Index dropped in December, led by prices of dairy products and meat. Brent crude oil prices, averaging around USD 62.7 in December, rose to an average of USD 64.5 in the first two weeks of January due to geopolitical developments.
20. The Global Supply Chain Pressure Index was above its historical average in December. The
global container index and the container index for China, took an upturn in November and continued this trend in December and January. The basket exchange rate increased at a higher rate in December compared to November amid the developments in the euro exchange rate. During this period, seasonally adjusted manufacturing industry PMI data pointed to a rise in both input and goods prices.
21. The downward trend in Inflation expectations continues. According to the January results of
the Survey of Market Participants, the year-end inflation expectation for 2026 was down by 0.2 percentage points to 23.2%, while the year-end inflation expectation for 2027 was 17.8%. The 12-month and 24-month-ahead inflation expectations were revised downwards by 1.2 and 0.5 percentage points to 22.2% and 16.9%, respectively. Meanwhile, the five-year-ahead inflation expectation was measured at 11.1%, with a decline of 0.3 percentage points. As for the expectations of the real sector, the 12-month-ahead inflation expectations of firms fell by 0.9 percentage points to 34.8% in December, the most recent data period for the January MPC Meeting. In the same period, the 12-month-ahead annual inflation expectation of households dropped by 1.3 percentage points to 50.9%. While showing signs of improvement, inflation expectations and pricing behavior continue to pose risks to the disinflation process.
22. While leading indicators suggest that monthly consumer inflation has firmed in January, led by
food prices, the rise in the underlying trend of inflation is limited. The surge in food prices is driven by the vegetables and red meat items. Having completed the previous year with a decline, vegetable prices increase notably due also to the seasonal supply conditions. In addition, consumer prices in the relevant month were shaped mostly by labor cost developments, revisions made to administered prices and lump-sum taxes as well as services items with high tendency towards time-dependent price setting and backward indexation. As for services, sectors such as health, items affected by the revaluation rate, transport, education and maintenance-repair are worth noting. Core goods inflation follows a relatively moderate course. In the energy group, monthly price increases have been recorded in tap water, fuel oil and electricity amid the End Source Supply Tariff, still the group’s annual inflation is expected to decline. In January 2026, revisions made to administered prices and lump-sum taxes were milder than past years, supporting the disinflation process. Meanwhile, the effects of the

upcoming changes in the basket and weight structure of the consumer price index as of January will be closely monitored. Monetary Policy
23. The Monetary Policy Committee (the Committee) has decided to reduce the policy rate (the
one-week repo auction rate) from 38% to 37%. The Committee has also lowered the Central Bank overnight lending rate from 41% to 40% and the overnight borrowing rate from 36.5% to 35.5%.
24. 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. The step size is reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook. Monetary policy stance will be tightened in case of a significant deviation in inflation outlook from the interim targets.
25. 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.
26. The Committee will make its policy decisions so as to create the monetary and financial
conditions necessary to reach the 5% inflation target in the medium term. The Committee will make its decisions in a predictable, data-driven and transparent framework.