The Central Bank of Turkey held its benchmark policy rate at 37% in its March 2026 meeting, aligned with recently revised market consensus as the central bank was widely expected to continue cutting interest rates until the outbreak of war in the Middle East triggered a surge in energy prices and raised the outlook inflation for major economies. It was the first hold following five consecutive cuts, reflecting policymakers' heed to the impact that higher energy prices may have on the Turkish economy. The central bank had already been forced to intervene in foreign exchange markets earlier in the month to contain the slide in the lira, and suspended one-week repo auctions, which lifted the lira interbank overnight reference rate by 300bps to nearly 40%. The central bank continued to see underlying inflation as stable as of February, and signaled it will see the impact of geopolitical developments on the economy before deciding possible policy responses.
