Türkiye 's central bank left its key interest rate at 37% on Thursday, as expected, keeping borrowing costs unchanged for a fourth consecutive meeting as it monitors the inflation impact of the Iran war. The lira held steady at 47.2350 against the dollar after the announcement, while the main Istanbul share index was slightly higher. The central bank said leading indicators suggested that the underlying trend of inflation would rise temporarily in July after easing slightly in June. "As a result of the growing uncertainty amid geopolitical developments, energy prices started trending up again... The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored," Reuters quoted the bank as saying in a statement. In a Reuters poll, all 10 economists had forecast no change in the policy rate. The central bank also did not adjust its overnight lending and borrowing rates from 40% and 35.5%, respectively. The bank uses the rate corridor to adjust the cost of funding to the market when necessary without changing the benchmark rate. Since the Iran war started at the end of February, Türkiye 's central bank has paused an easing cycle that began in late 2024 and has taken other liquidity steps that pushed the lira overnight rate up to the 40% limit. The war-related surge in energy prices has rattled import-reliant economies like Türkiye, where inflation was 32.11% last month. In its quarterly inflation report in May, the central bank raised its end-2026 interim inflation target to 24% from 16% and said the short-term inflationary effects of the Iran conflict would remain "pronounced.” In a presentation earlier this month, Central Bank Governor Fatih Karahan said the recent uptick in underlying inflation poses upside risks to the near-term pace of price increases.
