Summary of the Monetary Policy Committee Meeting

October 30, 2026, No: 2026-47
Meeting Date: October 22, 2026

Global Economy

1. Amid ongoing geopolitical developments, energy prices remain elevated and volatile. The duration and extent of uncertainties surrounding energy supply, supply chains, and transport costs will continue to be decisive in shaping the future trajectory of energy prices. Meanwhile, agricultural commodity prices also remain elevated due to adverse weather conditions and geopolitical developments. This poses an additional upside risk to the inflation outlook and inflation expectations.

2. Due to geopolitical developments, the weak growth outlook for the Middle East and Africa for 2026 persists. 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, weighted by the export shares of Türkiye’s foreign trade partners, is projected to increase by 1.6% and 2.5% for 2026 and for 2027, respectively.

3. Due to volatility in commodity prices, upside risks to global inflation persist. While central banks remain vigilant about these risks, they also take into account the adverse effects of these developments on growth and employment. Market pricing of policy rates suggests that expectations of rate hikes have been maintained in advanced economies. The persistence of the supply shock caused by geopolitical developments along with adverse global weather conditions driven by climate phenomena such as El Niño and the degree to which these factors may disrupt inflation expectations are key considerations for the course of global monetary policy. Recently, heightened uncertainty and fluctuations in risk appetite have led to capital outflows from emerging equity markets, while downside risks to portfolio flows remaining elevated.

Monetary and Financial Conditions

4. The average four-week growth rate of retail loans receded to 1% in the September 11–October 16 period on the back of the deceleration in credit cards and general-purpose loans. The average four-week growth rate of Turkish lira (TRY) commercial loans stood at 2.3%, while that of foreign currency (FX) commercial loans, adjusted for exchange rate effects, stood at 1.2%.

5. TRY deposit rates decreased by 102 basis points compared to the week ending September 11, and stood at 42.9% as of the week ending October 16. Over the same period, TRY commercial loan rates (excluding overdraft accounts and credit cards) dropped by 680 basis points to 41.9%. General-purpose loan rates (excluding overdraft accounts) decreased by 264 basis points to 61.5%, housing loan rates fell by 43 basis points to 41.5%, and vehicle loan rates, which remained volatile, increased by 310 basis points to 43.6%.

6. To support macrofinancial stability and banks’ liquidity management, the Central Bank of the Republic of Türkiye (CBRT) has made changes to the reserve requirement framework based on loan growth. Accordingly, the exemptions from growth limits for general-purpose loans and FX loans have been revised, and the eight-week growth limit for SME loans has been raised from 4.5% to 5%. Additionally, the ratios of TRY required reserves to be maintained in blocked accounts have been lowered.

7. The gross international reserves of the CBRT have decreased by USD 9.6 billion since September 11, reaching USD 169.1 billion as of October 16. Türkiye's five-year credit default swap (CDS) premium has increased since September 9, standing at 251 basis points as of October 21. Compared to September 9, the one-month and 12-month implied exchange rate volatility of the Turkish lira declined to 5.5%, and 17.9% as of October 21. Since the previous MPC meeting week through October 16, based on the results derived from the existing calculation methodology, the Government Domestic Debt Securities (GDDS) market posted an outflow of USD 0.5 billion, while the stock market portfolio flows remained steady, resulting in a net portfolio outflow totaling USD 0.5 billion.

Demand and Production

8. In August, the retail sales volume index recorded a monthly increase of 1.4% and a quarterly increase of 1.7%. Retail sales excluding gold increased by 0.8% month-on-month and 0.3% quarter-on-quarter. Thus, the quarterly growth of retail sales excluding gold decelerated. In the same period, the trade sales volume index rose by 0.2% month-on-month but declined by 1.0% quarter-on-quarter. In August, the services production index rose by 0.2% on a monthly basis, and by 1.5% on a quarterly basis. In the third quarter, card spending remained flat on a quarterly basis. Sales of major appliances recorded a limited quarterly increase as of August. As for automobile sales, the decline recorded in the previous quarter continued in the third quarter. Survey data for manufacturing firms point to a decline in registered domestic market orders in both the third and fourth quarters as of October. Meanwhile, expected future domestic market orders declined in the fourth quarter as of October, after posting a slight increase in the third quarter. To sum up, the latest data indicate that domestic demand remains weak.

9. In August, the industrial production index decreased by 1.0% month-on-month when adjusted for seasonal and calendar effects, and by 1.9% year-on-year when adjusted for calendar effects. On a quarterly basis, industrial production fell by 2.4% in the third quarter as of August. Even when typically volatile sectors, such as other transportation equipment and similar sectors, are excluded to monitor the underlying trend, industrial production shows a decline in quarterly terms. In this context, the underlying trend of industrial production has weakened. Data from the business tendency survey for September and October point to a fall in production volume expectations for the next three months. Excluding the coke and refined petroleum products sector, the capacity utilization rate posted a slight decline in the third quarter but increased in the fourth quarter as of October. This increase was driven by the motor vehicles sector. The index of production in construction rose by 3.3% in quarterly terms in the third quarter as of August but declined by 1.1% compared to the same period of the previous year.

10. In August, seasonally adjusted employment stood at 32.5 million people, representing a slight decline compared to the previous quarter’s average. In this period, the labor force participation rate decreased by 0.2 percentage points quarter-on-quarter. As the decline in employment and the fall in the participation rate largely offset each other, the unemployment rate remained nearly flat on a quarterly basis. Survey indicators suggest that manufacturing firms' expectations for future employment remained below historical averages.

11. The current account balance recorded a monthly surplus of USD 4.1 billion in August. The 12- month cumulative current account deficit increased by USD 0.6 billion month-on-month to USD

42.1 billion. Travel revenues stood at USD 8.2 billion on a monthly basis and USD 60.1 billion in 12-month cumulative terms. The services balance surplus remained robust at USD 63.9 billion.

12. In September, seasonally adjusted exports and imports both rose. Imports and exports also increased on an annual basis as well, with a larger increase in exports. Against this background, the 12-month cumulative foreign trade deficit declined compared to the previous month. Gold imports stood at around USD 0.4 billion in September, and declined to USD 18 billion in 12- month cumulative terms. According to the current data, the 12-month cumulative current account deficit is projected to narrow in September. The 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 increased somewhat in the third quarter, after declining in the second quarter of the year. When provisional foreign trade data for September are considered along with the high-frequency leading indicators for October, the three-month average trends point to a flat course in exports and a slight increase in imports, and a widening of the foreign trade deficit compared to the third 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 was 149.0% in August. In the non-bank corporate sector, this ratio was 216.0%. Accordingly, external financing opportunities remain at high levels.

Inflation Developments and Expectations

14. Consumer prices increased by 1.84% in September, while annual inflation decreased by 1.78 percentage points to 29.73%. On a monthly basis, food prices declined, driven by prices of fresh fruits and vegetables, while energy prices continued to rise. Reflecting the back-to-school effect, related items, particularly education services, registered price increases. Annual inflation rose significantly in energy, remained flat in core goods, and declined in the services and food and non-alcoholic beverages groups. The annual rate of change decreased by 1.68 percentage points to 29.00% in the B index (CPI excluding energy, unprocessed food, alcoholic beverages-tobacco and gold) and by 1.37 percentage points to 28.70% 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 the food and non-alcoholic beverages, services, core goods, and alcohol-tobacco-gold groups to annual consumer inflation decreased by 1.40, 0.70, 0.05, and 0.02 percentage points, respectively, whereas that of the energy group edged up by 0.39 percentage points.

16. In September, the sharp monthly increase of 6.25% in energy prices was driven by rising fuel prices resulting from global developments. The rise in refinery margins also continued to affect fuel prices. Monthly inflation in services slowed in September, led by transport and communication services. In core goods, clothing and footwear prices rose with the launch of the new season. Meanwhile, there were notable price increases in consumer electronics and white goods within the durable consumption goods group. During this period, the decline in food prices was mainly driven by lower prices of unprocessed food, notably fresh fruits and vegetables. Meanwhile, the monthly price increase in processed food decelerated compared to the previous month.

17. In seasonally adjusted terms, monthly consumer price inflation eased, and both the B and C indices declined compared to the previous month. Among the components of the B index, price increases gained pace in core goods and slowed in services and processed food. Indicators monitored by the CBRT suggest that underlying inflation declined month-on-month in September. Similarly, three-month averages also pointed to a decline, highlighting a more pronounced slowdown in underlying inflation. Underlying inflation decreased from 2.2% in the second quarter to 1.8% in the third quarter.

18. As of September, seasonally adjusted inflation based on three-month averages remained flat in core goods compared to the previous month while declining in services. Despite supply-side shocks caused by geopolitical developments, the weak demand conditions appear to be limiting underlying inflation.

19. The prevailing price-setting behavior in the services sector leads to significant inertia, causing the impact of shocks on inflation to persist for an extended period, and services inflation remains higher than goods inflation. As of September, annual goods inflation was around 25%, while services inflation hovered around 38%. Annual inflation declined in all subgroups of the services sector. In September, other services recorded a monthly price increase of 3.45%, reflecting price increases in financial services as well as education services. Prices of education services rose by 14.19% in September. The increases in university tuition fees, which were reflected entirely in September last year based on the registration period of foundation higher education institutions, extended over the August-September period this year, which curbed services inflation in September. On the other hand, unlike previous years, there were relatively high increases in primary and secondary school fees in September. Meanwhile, in transport services, despite a 16.04% rise in school bus fares, the monthly price increase was limited to 0.24% due to a 9.03% decline in air passenger transport fares. Rent inflation continued its downward trend. In fact, the annualized rate of seasonally adjusted three-month rent inflation has declined to the level of annual consumer inflation. The restaurants-hotels group remained on a moderate track. Communication services also registered modest price increases in September, following high monthly increases in the previous two months.

20. In September, domestic producer prices rose by 2.07%, while annual producer inflation decreased by 0.57 percentage points to 27.38%. During this period, energy prices continued to stand out among the main industrial groupings, with an increase of 3.55%. Prices of intermediate goods increased by 2.04%, while price increases in other main industrial groupings ranged between 1.5% and 1.6%. On a sectoral basis, there were notable price increases in tobacco, refined petroleum products, and coal and lignite.

21. In September, international commodity prices continued to rise, driven by energy and agricultural commodities. In the first twenty days of October, energy commodity prices increased, while agricultural and industrial commodity prices declined. Global gold prices declined after August. While Brent crude oil prices remained highly volatile, spot prices, which averaged around USD 117 in September due to geopolitical developments, averaged around USD 127 in the first twenty days of October. Similarly, propane, butane, coal, and TTF natural gas prices continued to rise. Global food prices remained on an upward trend, and the FAO Food Price Index increased in September, led by sugar and cereal prices. Escalating tensions between Russia and Ukraine kept supply concerns alive, and prices of certain cereal products increased somewhat in the recent period. The rise in futures prices of certain agricultural commodities, such as sugar and rice, due to the effects of the El Niño climate phenomenon, stood out. Elevated energy and commodity prices due to ongoing geopolitical tensions continue to pose an upside risk to the inflation outlook.

22. The Global Supply Chain Pressure Index stayed above its historical average, rising further in August and September. While risks related to the Strait of Hormuz persist amid geopolitical developments, global freight rates remain high. Seasonally adjusted manufacturing industry PMI data for September pointed to an increase in input and output price indices and a partial improvement in suppliers’ delivery times. Meanwhile, the moderate course of the basket exchange rate continues.

23. According to the October Survey of Market Participants, the year-end inflation expectation for 2026 remained unchanged at 29.6%, while the year-end inflation expectation for 2027 increased by 0.6 percentage points to 23.3%. The 12-month-ahead inflation expectation rose by 0.2 percentage points to 23.9%, while the 24-month-ahead inflation expectation was down by 0.4 percentage points to 17.9%. The five-year-ahead inflation expectation increased by 0.1 percentage points to 12.2%. As for real sector expectations, the 12-month-ahead inflation expectation of firms decreased by 0.3 percentage points to 32.5% in September. In the same period, the 12-month-ahead inflation expectation of households was unchanged at 45.6%. Inflation expectations and pricing behavior continue to pose a risk to the disinflation process.

24. Despite monthly fluctuations, recent inflation figures and leading indicators confirm the deceleration in the underlying trend of inflation. The decline in the underlying trend of inflation in September was also partly driven by a mechanical effect stemming from the fact that tuition fee increases at foundation universities, which had occurred entirely in September of the previous year, were spread across August and September this year. Leading indicators point to an increase in seasonally adjusted monthly services inflation compared to the previous month, in line with expectations, as the mechanical effect dissipates, although inflation is expected to remain below the levels observed in earlier months. In October, although price increases in durable consumer goods, such as white goods and consumer electronics, are expected to continue, seasonally adjusted core goods inflation is projected to remain moderate. On the other hand, data on food prices point to an increase in seasonally adjusted monthly food inflation, driven by fresh fruit and vegetable prices. In addition, the rise in global energy prices driven by geopolitical developments is expected to continue pushing up domestic energy prices through fuel, bottled gas, and solid fuels. Against this backdrop of food and energy price developments, monthly consumer price inflation is expected to increase compared to the previous month, while inflation in the B and C indices is projected to follow a more moderate course. Therefore, the increase in headline inflation is expected to have a limited effect on the underlying trend of inflation. 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 reduce the policy rate (the one-week repo auction rate) from 37 percent to 36 percent. The Committee has also lowered the Central Bank overnight lending rate from 40 percent to 39 percent and the overnight borrowing rate from 35.5 percent to 34.5 percent.

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. The size and timing of policy steps will be decided 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.