The Central Bank of Turkey has maintained its benchmark one-week repo interest rate at 37 percent for the fourth consecutive time, driven by inflation indicators and energy price fluctuations stemming from tensions caused by the Iran war and inflation.

During its meeting on Thursday, the bank's Monetary Policy Committee kept the overnight lending rate unchanged at 40 percent and the overnight borrowing rate at 35.5 percent, in line with previous expectations.

The committee said in a statement following the meeting that the core inflation rate recorded a slight decline last June, while leading indicators show that this rate will temporarily rise this July.

Consumer price inflation in Turkey recorded a slight decline last June for the first time since the outbreak of the Iran war in February, driven by a drop in the energy bill cost to 0.99 percent, while the annual rate reached 32.11 percent.

Inflation had continued to rise last May, recording a monthly increase of 1.71 percent and an annual rate of 32.61 percent, reaching its highest level since October 2025. This followed a broad surge in April of 4.18 percent, resulting from energy price fluctuations caused by geopolitical developments.

Uncertainty

The statement pointed out that energy prices are rising again as a result of escalating uncertainty driven by developments in Iran, while recent data indicates a notable weakness in domestic demand. The impacts of geopolitical developments on inflation expectations are being closely monitored through cost channels, economic activity, and expectations.

Inflation indicators continue to pressure the Central Bank of Turkey in determining its monetary policy (EPA)

The statement noted that energy prices remain high, and first-quarter data indicates a continued slowdown in economic activity, while key indicators point to sustained weakness in domestic demand.

The central bank cut its interest rate by 100 basis points last January, from 38 to 37 percent. In March, it ended its 9-month monetary easing cycle, holding the interest rate at 37 percent, and has kept it unchanged since April.

The committee stressed in its statement that the tight monetary policy, which will continue until price stability is achieved, will reinforce the disinflation process through demand, exchange rates, and market expectations.

It stated that it will determine the steps to be taken regarding the interest rate through a cautious approach, in a manner that curbs the upward trend of core inflation and provides the monetary and financial conditions required to bring inflation down to the medium-term target of 5 percent, taking into account the lagged effects of monetary tightening.

It emphasized that all monetary policy tools will be used decisively, and the committee will make its decisions within a predictable, data-driven, and transparent framework, with policy to be further tightened in the event of a sudden collapse in inflation expectations.

Trade with Syria

On another front, Turkey and Syria affirmed their determination to continue working toward the goal of raising bilateral trade volume to $10 billion.

During his participation in a meeting titled "Syria's Commercial and Industrial Free Zones and Investment Environment" held in Ankara on Wednesday—attended by Qutaiba Ahmed Badawi, Head of Syria's General Authority for Land and Sea Ports, and Rifat Hisarcıklıoğlu, President of the Union of Chambers and Commodity Exchanges of Turkey (TOBB)—Turkish Trade Minister Ömer Bolat stated that the trade volume between Turkey and Syria reached approximately $3.75 billion in 2025, an increase of over 40 percent.

Turkish Trade Minister Ömer Bolat speaking during a meeting on trade and investment with Syria in Ankara (from his X account)

Bolat emphasized that the two countries are determined to increase production and investments, alongside strengthening, expanding, and modernizing land customs gates and maritime transport lines to contribute to the growth of trade movement between them. He noted that trade and passenger transit across border crossings between the two countries continues uninterrupted.

Bolat pointed out that work is proceeding at an accelerated pace to open the Nusaybin-Qamishli crossing, located at the far eastern end of Turkey's border with Syria, to trade, passengers, and transit traffic before the end of the year.

He added that the actual launch of transit trade between Turkey and Syria since last April has helped revitalize trade with Lebanon, Jordan, Iraq, Saudi Arabia, Kuwait, Qatar, the UAE, Oman, and Bahrain, describing this as a positive development.

Bolat stressed the importance of expanding and establishing new land transport corridors, as well as oil and natural gas transport corridors extending from Turkey through Syria to Jordan, Iraq, and the Gulf states, amid disruptions witnessed in the region due to the war and the closure of the Strait of Hormuz. He noted that the governments of both countries have made progress in accelerating transit trade with the Gulf states.

He pointed out that transit traffic through Saudi Arabia—which had been suspended for about 14 years—as well as through Syria and Jordan, has resumed on a regular basis starting April 15.

For his part, Qutaiba Badawi, Head of Syria's General Authority for Ports and Customs, stated that the Idlib Free Trade Zone project and the dry port in the governorate constitute an integrated hub for industry, trade, and logistics services, inviting Turkish investors and companies to participate in Syria's new economic success story by establishing a presence in this strategic location.