Turkey Holds Policy Rate at 37 Percent for a Fifth Meeting as Inflation Slows to 31.51 Percent

The Central Bank of the Republic of Türkiye left its one-week repo auction rate at 37 percent on 10 September 2026, the fifth consecutive meeting without a change, after annual inflation eased to 31.51 percent in August from 31.75 percent in July. Sixteen of the seventeen economists polled by Reuters ahead of the decision had expected exactly that.

What changed, and what did not

Nothing in the rate corridor moved. The policy rate stays at 37 percent, the overnight lending rate at 40 percent and the overnight borrowing rate at 35.5 percent. Those are the same levels set in January, when the Monetary Policy Committee cut the policy rate from 38 percent to 37 percent and then stopped.

The number that did move is the central bank's own forecast. The CBRT now puts year-end 2026 inflation at 28 percent, up from a previous 26 percent. That is an admission that disinflation is running slower than the bank planned, and it is the most consequential line in the announcement for anyone holding Turkish property or a lira loan.

August's monthly print was 1.84 percent. Energy did most of the damage: energy prices rose 5.46 percent on the month and 39.23 percent on the year, with fuel alone up 11.23 percent, as crude moved above 100 dollars a barrel on tensions between the United States and Iran. Turkey imports almost all of its oil and gas, so that channel feeds straight into the consumer index and into construction input costs.

The mechanism

The decision is taken by the Monetary Policy Committee, which publishes a press release on interest rates after each scheduled meeting and a fuller summary roughly a week later. The one-week repo auction rate is the operational policy rate; the overnight lending and borrowing rates form the corridor around it, and commercial bank funding costs, including housing loan pricing, are set off that corridor rather than off any administered mortgage rate.

The committee repeated its standing formula: policy will be tightened if there is a significant and persistent deterioration in the inflation outlook, and decisions will be taken prudently on a meeting-by-meeting basis, with the medium-term target still 5 percent. There is no forward commitment to cut. The next scheduled meeting is 22 October 2026.

What it means for a foreign buyer

A lira mortgage in Turkey is priced off a 37 percent policy rate and a 40 percent overnight lending rate. At those levels domestic bank housing credit is not a financing route for most foreign purchasers, and nothing in this decision changes that before late October at the earliest. Buyers who were waiting for the easing cycle to resume before borrowing locally now have a firm date to watch rather than a vague expectation.

The more immediate effect is on price. With headline inflation above 31 percent and the central bank's own year-end forecast revised up to 28 percent, nominal house price increases in Turkey continue to disguise real declines. A property that appreciates 25 percent in lira terms over a year in this environment has lost purchasing power. Foreign buyers converting hard currency into a purchase are effectively buying into a market where the lira price tag is inflating faster than the asset.

That shows in transaction data. Turkish Statistical Institute figures for the first half of 2026 put total house sales at 699,516 units, down 3.1 percent on the same period of 2025, while mortgaged sales rose 32.2 percent to 142,794. Sales to foreign buyers fell 9.2 percent over the half year to 9,083 units, even though June alone recorded a 20.1 percent year-on-year rise to 2,015. Domestic buyers are returning to credit; foreign demand has not recovered to 2022 and 2023 levels.

Context

Turkey has no cap on foreign freehold ownership by nationality in most of the country, and foreign nationals take title through the TAPU system administered by the General Directorate of Land Registry and Cadastre. Restrictions bite through military clearance zones and municipal limits on the total foreign-owned share of a district rather than through a national quota. The separate citizenship-by-investment route requires a minimum 400,000 dollar property purchase held for three years, and because that threshold is set in dollars it is unaffected by lira inflation, which is one reason the programme has held up better than ordinary foreign purchase volumes.

For owners already holding, the relevant exposure is not the policy rate directly but the taxes and service charges that are revalued annually against inflation. A 28 percent year-end forecast implies another substantial uplift in assessed values and in the revaluation coefficients applied to property tax bases for 2027.