Turkey’s central bank is holding off on a monetary policy decision until it sees more data on inflation trends for July—and clearer developments regarding the conflict in Iran—before deciding whether to ease policy or adjust interest rates, Governor Fatih Karahan told investors.
Waiting for Clarity
Speaking at a JPMorgan Chase & Co. conference in Istanbul on Friday, Karahan declined to offer specific guidance on interest rates, according to people familiar with the discussions who spoke to Bloomberg. While officials are actively debating whether to resume monetary easing, he emphasized that policymakers want to assess the full picture from July’s inflation report before moving forward.
The central bank is also seeking more clarity on how the war in Iran is evolving. Karahan noted this during the same event, which was also attended by Finance Minister Mehmet Şimşek.
Energy Prices and Inflation Dynamics
June’s drop in inflation was largely driven by falling energy prices following a U.S.-Iran ceasefire agreement. However, oil prices have since rebounded amid renewed fighting that has undermined the truce. Investors are closely watching ongoing negotiations aimed at ending the conflict.
As a major oil importer, Turkey is highly sensitive to energy price fluctuations—which significantly affect transportation costs and other input prices.
What’s Next?
July inflation data is due for release on August 3. Markets will scrutinize the figures to see whether downward pressure on prices continues—especially after June’s reading marked the first decline since the Iran war began. That dip had sparked speculation that the central bank might ease policy at its July 23 meeting.
Karahan stressed that policy decisions will be made case-by-case, rejecting any notion of ‘autopilot’ moves. Among possible options under review are: reverting to the 37% benchmark rate and restarting one-week repo auctions; maintaining funding via the 40% overnight lending rate while reintroducing weekly repos; or lowering the overnight lending rate to 40% and continuing to use it as the main policy rate.