Summary of the Monetary Policy Committee Meeting (2026-14)

Summary of the Monetary Policy
Committee Meeting
March 18, 2026, No. 2026-14
Meeting Date: March 12, 2026
Global Economy

1. As uncertainty heightened amid geopolitical developments unfolding in late February, global
   risk appetite deteriorated, and energy prices increased. The growing uncertainties regarding energy supply, supply chains, and transport costs led to elevated volatility in commodity prices across the board, with notable increases in crude oil and natural gas prices. The duration and extent of supply chain disruptions are particularly important for the future trajectory of energy prices.
2. On the other hand, following the U.S. Supreme Court’s decision to strike down some tariffs
   uncertainty regarding current global trade policies heightened to some extent compared to the previous MPC period. In addition, downside risks to the growth outlook intensified, partly due to geopolitical developments. 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, was revised somewhat downward compared to the previous MPC period is projected to increase by 2.2% annually in 2026 and 2027.
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 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, as increased uncertainty and fluctuations in risk appetite have led to portfolio outflows from emerging stock markets, downside risks to portfolio flows have intensified. Monetary and Financial Conditions
4. The average four-week growth rate of retail loans declined to 2.7% in the January 23–March 6
   period. This was driven by general-purpose and vehicle loans. While the average four-week growth rate of TRY commercial loans decreased to 2.7%, that of foreign currency (FX) commercial loans adjusted for exchange rates was flat at 1.1%.
5. Turkish lira (TRY) deposit rates increased by 39 basis points compared to the week ending
   January 23 and stood at 44.4% as of the week ending March 6. In the same period, TRY commercial loan rates (excluding overdraft accounts and credit cards) went up by 239 basis points to 48.3%. General-purpose loan rates (excluding overdraft accounts) rose by 259 basis points to 59.0%, housing loan rates fell by 208 basis points to 34.2%, and vehicle loan rates fluctuating from time to time went down by 534 basis points to 32.6%.
6. On January 24, the Central Bank of the Republic of Türkiye (CBRT) made changes to the reserve
   requirement ratios for Turkish lira funding obtained from abroad to strengthen macro financial stability and the monetary transmission mechanism. Additionally, on January 31, the eight-

week growth limit for foreign currency loans was reduced to 0.5% from 1%, and an eight-week growth limit of 2% was introduced for overdraft account limits allocated to consumers to support the tight monetary policy stance and strengthen macro financial stability.
7. The gross international reserves of the CBRT decreased by USD 18.1 billion since January 23
and stood at USD 197.5 billion as of March 6. Türkiye's five-year credit default swap (CDS) premium rose by around 40 basis points since January 21 to 254 basis points as of March 11. Showing a rise compared to January 21, the 1-month and 12-month implied exchange rate volatility of the Turkish lira reached 13.3% and 20.8%, respectively, as of March 11. Since the previous MPC meeting week through March 6, net portfolio inflows totaled USD 1.7 billion, comprising USD 0.6 billion of inflows to the government domestic debt securities (GDDS) market and USD 1.1 billion of inflows to the stock market. Demand and Production
8. In the final quarter of 2025, gross domestic product (GDP) increased by 3.4% year-on-year and
0.4% quarter-on-quarter. The contraction in agricultural added value due to the decline in crop production caused by frost and drought, continued to curb annual growth in the final quarter as well. By the expenditure approach, private consumption and total investments made a positive contribution to annual growth in this period. On a quarterly basis, private consumption increased while total investments decreased slightly. In the same quarter, imports of goods and services rose while exports of the same declined. Thus, net exports’ contribution to quarterly growth was negative. In this context, economic activity continued to lose momentum in the final quarter, growing below its potential. Throughout 2025, growth was 3.6%. Contribution of private consumption to annual growth declined slightly, that of investments increased and net exports curbed growth.
9. In January, the retail sales volume index recorded a monthly increase of 2.4% and a quarterly
increase of 4.3%. The rise in retail sales excluding gold remained lower on a monthly and quarterly basis. In the same period, the trade sales volume index was up by 0.1% on a monthly basis and by 1.5% on a quarterly basis. In December, the services production index increased by 1.0 on a monthly basis and posted a modest 0.5% rise on a quarterly basis. As of February, card spending registered a moderate increase on a quarterly basis. White goods sales dropped in January, while automobile sales decreased in the first quarter as of February. Survey data for manufacturing firms point to a moderate rise in registered domestic market orders and a decline in expected domestic market orders for the future. In sum, indicators for the recent period point out that demand conditions continue to support the disinflation process.
10. In January, the industrial production index decreased by 2.8% month-on-month when adjusted
for seasonal and calendar effects, and by 1.8% year-on-year when adjusted for calendar effects. On a quarterly basis, industrial production declined by 1.2% in the first quarter as of January. Consistent with the goal of completing and delivering the residential buildings in the earthquake-affected region by the end of 2025, production in construction-related sectors, which had been particularly robust in the second half of last year, registered a decline in January. In fact, over half of the month-on-month contraction in industrial production in January stemmed from the negative contributions of the rubber-plastic, mineral products, basic metal, and fabricated metals sectors. Excluding also the typically volatile sectors, such as other transportation and similar sectors, industrial production posted a more limited decline on a quarterly basis. Yet, the underlying trend of industrial production remains weak. Survey indicators for the manufacturing industry point to a moderate increase in the sector’s activity in the first quarter. On the other hand, the capacity utilization rate remained almost flat. The index of production in construction went up by 1.3% in quarterly terms in the last quarter of 2025, and by 12.9% compared to the same period of the previous year.

11. In January, seasonally adjusted employment stood at 32 million people, decreasing by 1.7%
    compared to the previous quarter average. In this period, the labor force participation rate decreased by 1.1 percentage points quarter-on-quarter. Although employment decreased, the decline in the participation rate led the unemployment rate to fall to 8.1% in January from an average of 8.3 percent in previous quarter. Survey indicators suggest that the outlook lagging behind historical averages for manufacturing firms' future employment expectations persisted in the first quarter of the year as well.
12. With the release of January data, a methodological change was adopted in calculating interest
    payments on portfolio investments under the primary income balance in the balance of payments statistics, resulting in a retrospective revision starting from September 2020. This revision, which is based on the residency of securities holders, had a total upward effect of USD 8.9 billion on the current account deficit during the period in question, of which USD 4.8 billion was recorded in 2025. The offsetting impact of the revision was reflected in the net errors and omissions item at the same amount. Consequently, the current account deficit for 2025 increased from USD 25.2 billion to USD 30.1 billion following the revision, while the current account deficit-to-GDP ratio rose from 1.6% to 1.9%. Following this revision, the current account balance ran a monthly deficit of USD 6.8 billion in January. The 12- month cumulative current account deficit increased by USD 2.8 billion month-on-month and stood at USD 32.9 billion. Travel revenues came out at USD 3.4 billion, reaching USD 60.2 billion in 12-month cumulative terms. The services balance surplus remained robust at USD 63.1 billion.
13. In February, 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 continued to be boosted by the global increase in gold prices. As of February, gold imports stood at USD 23.4 billion in 12-month cumulative terms. According to the current data, the 12- month cumulative current account deficit is projected to expand in February. The negative impact of recent geopolitical developments on the current account deficit is expected to become apparent in March, and the extent of this impact is estimated to vary depending on the course and intensity of the conflict. Seasonally adjusted imports of consumption goods declined slightly during the January–February period. When provisional foreign trade data for February are considered along with the high-frequency leading data for March, the three￾month average trends point to a limited decline in exports and a flat trend in imports.
14. Regarding the financing of the current account deficit, the banking sector’s 12-month
    cumulative long-term debt rollover ratio stood at 167.2% in January. In the non-bank corporate sector, this ratio was 214.4%. Accordingly, external financing opportunities remain at high levels. Inflation Developments and Expectations
15. Consumer prices rose by 2.96% in February and annual inflation increased by 0.88 percentage
    points to 31.53%. While annual inflation went up significantly in the food and alcohol-tobacco￾gold groups, it declined in other main groups. Despite the rise in annual consumer inflation, the annual rate of change in the B index (CPI excluding unprocessed food, energy, alcoholic beverages, tobacco, and gold) and the C index (CPI excluding energy, food and non-alcoholic beverages, alcoholic beverages, tobacco, and gold) declined by 0.20 percentage points and 0.34 percentage points to 29.91% and 29.46%, respectively. Contributions of core goods and energy to annual consumer inflation declined month-on-month by 0.45 percentage points and 0.25 percentage points, respectively, whereas contributions of the food and non-alcoholic beverages, services, and alcohol-tobacco-gold groups increased by 1.24 percentage points,
    0.24 percentage points, and 0.10 percentage points, respectively. In seasonally adjusted terms,

the monthly increase in consumer prices was relatively flat compared to the previous month. Meanwhile, consumer inflation excluding food decelerated.
16. In February, the food group was the most prominent driver of the rise in consumer inflation.
Unprocessed food prices rose largely due to vegetable and white meat prices, while particularly milk and dairy products had a marked impact on the processed food group. That said, price increases spread across the whole group. In this period, food prices were also affected by Ramadan-specific factors in addition to weather conditions. In seasonally adjusted terms, services inflation rose compared to the previous month due in part to the significant increases in prices of communication services. In the energy group, fuel and bottled gas prices registered hikes in this period, following the developments in international energy prices. On the other hand, the fall in electricity prices due to the end-source supply tariff (ESST) limited a more negative outlook in this group, amid the developments in electricity market clearing prices. In the core goods group, clothing and footwear prices continued to decrease due to seasonal factors, while durable goods prices rose moderately. Meanwhile, prices in the other core goods subgroup remained almost unchanged. Against this background, seasonally adjusted core goods inflation declined.
17. The underlying trend of inflation was essentially flat in February. Seasonally adjusted monthly
inflation increased slightly in the B index but fell in the C index. This divergence was driven by the significant increase in processed food inflation (from 2.7% in January to 5.2% in February). Among the components of the B index, price increases were higher in processed food and services groups but notably weaker in core goods. When indicators monitored by the CBRT are considered altogether, the underlying trend of inflation was almost flat. These indicators recorded a limited increase in terms of quarterly averages.
18. As of February, the seasonally adjusted average inflation over the last three months decreased
in core goods compared to the previous month, whereas it remained relatively flat in the services sector.
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 February, annual goods inflation was around 27%, while services inflation hovered around 40%. Among subgroups, communication services stood out with a monthly increase of 8.73% in February, driven by mobile phone call charges. The sharp rise in prices of communication services over the last three months is notable. In the other services group, financial services recorded the most significant increase at 11.06%, followed by maintenance and repair at 5.00%. Meanwhile, the monthly price increase in education services was lower compared to the same period of the previous year. In this period, monthly rent inflation stood at 3.46%, while annual rent inflation declined to 53.91%. Prices in the restaurants-hotels group posted a relatively limited increase of 2.82%, despite the unfavorable course in food. Prices in transport services remained moderate, reflecting the seasonal decline in airfares.
20. Domestic producer prices remained elevated with a rise of 2.43% in February, and annual
inflation edged up 0.39 percentage points to 27.56%. In this period, energy prices declined (- 0.22%), whereas durable (4.47%) and non-durable (3.30%) consumption goods stood out with high rates of price increases.
21. Brent crude oil prices, averaging around USD 71.1 in February, followed a quite volatile course
in the first two weeks of March due to geopolitical developments, and reached USD 88.5 on average by March 11. However, the immediate launch of the sliding-scale tariff significantly limited the spillovers of hikes in crude oil prices into consumer inflation. Similar to oil prices, TTF natural gas prices rose notably amid concerns of supply constraints. In addition, prices for

commodities with strong ties to the energy sector, such as urea, sulfur, polypropylene, and polyethylene have also been on the rise. Disruptions in the flow of energy and raw materials, particularly when combined with sharp increases in oil and natural gas prices, carry the risk of driving up production costs and creating inflationary pressures on a global scale.
22. The Global Supply Chain Pressure Index was above its historical average in February. The
closure of the Strait of Hormuz coupled with the search for alternative routes led to longer lead times, and security risks caused higher insurance premiums and freight rates. In this period, the container index for China rose evidently and dry cargo shipping indices took an upturn while the global container index receded. The basket exchange rate remained relatively flat amid the developments in the euro exchange rate as of March 11. Seasonally adjusted manufacturing industry PMI data pointed to a rise in both input and goods prices.
23. Inflation expectations posted an increase in February. According to the results of the Survey of
Market Participants, the year-end inflation expectation for 2026 rose by 0.9 percentage points to 24.1%, and that for 2027 rose by 0.6 percentage points to 18.4%. The 12-month-ahead inflation expectations were revised downwards by 0.1 to 22.1%, while 24-month-ahead inflation expectations were revised upwards by 0.2 percentage points to 17.1%, respectively. Meanwhile, the five-year-ahead inflation expectation was measured at 11.4 %, with an increase 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 32.0% in February. In the same period, the 12-month-ahead annual inflation expectation of households remained at 48.8%. Inflation expectations and pricing behavior continue to pose risks to the disinflation process.
24. Leading data point that the negative course of food prices in the last two months lost pace in
March. The surge in prices of vegetables in the previous period was replaced by a modest increase in the first half of March. Meanwhile, due to rising oil prices amid geopolitical developments, domestic energy prices register notable increases, with fuel in the lead. Owing to the sliding-scale tariff, a large portion of the rise in refined product prices are now met by the lump-sum SCT, averting a more negative picture in this group. In the services group, transport prices are expected to take the lead in March. Prices in transport services, particularly in air passenger transport, reveal an upward trend amid the geopolitical turmoil and the course of oil prices. Moreover, education prices continue to rise, led by developments in private school fees. Leading indicators point to a relatively mild course in the core goods group. Given the volatility in commodity prices and the size of supply constraints, uncertainties over the inflation outlook grew significantly higher. The effects of geopolitical developments on the inflation outlook through the cost channel and economic activity are being closely monitored. Monetary Policy
25. Mounting uncertainties amid geopolitical developments resulted in high volatility and surging
prices in crude oil, natural gas and commodities. To contain the risks posed by these factors to the inflation outlook, decisions supporting tight monetary policy have been enacted alongside coordinated fiscal measures. Accordingly, considering the developments in financial markets, the one-week repo auctions were suspended as of March 2. Thus, the effective use of the liquidity management tools enabled the average funding cost to stand at 40%, which is the CBRT’s overnight lending rate. Moreover, the CBRT started conducting Turkish lira-settled foreign exchange forward selling transactions to ensure the sound functioning of the foreign exchange market, prevent possible volatilities in exchange rates and stabilize foreign exchange liquidity. In addition to monetary policy actions, fiscal measures were put into use in a coordinated way. In this context, the sliding-scale tariff, abolition of the customs duty on imports of fertilizers and imposition of restrictions on exports of fertilizers will curb the

passthrough of the developments in commodity prices to consumer inflation and producers’ costs.
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, which can also be driven by the recent developments, monetary policy stance will be tightened.
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.