Economy
Turkish central bank keeps key policy rate unchanged again
Türkiye’s central bank held its benchmark interest rate unchanged at 37% on Wednesday, maintaining its cautious stance for the second straight month amid pricing pressures due to the Middle East conflict.
In March, the Central Bank of the Republic of Türkiye (CBRT) halted an easing cycle, citing market fallout from the Iran war that it said could affect inflation.
On Wednesday, the bank also left its overnight lending and borrowing rates unchanged at 40% and 35.5%, respectively.
Before the regional conflict began shifting expectations, the CBRT had been expected to continue a rate-cutting cycle that began in late 2024.
The Iran war sent energy prices soaring, posing a challenge for import-heavy economies like Türkiye, where inflation still eased to 30.87% last month. On Tuesday, U.S. President Donald Trump extended the war cease-fire indefinitely.
In a statement following Wednesday’s Monetary Policy Committee (MPC) meeting, the CBRT said the underlying trend of inflation declined in March, while leading indicators suggest a slight increase in April.
The CBRT said energy prices “remain elevated and exhibit notable volatility” amid geopolitical developments and the resulting uncertainties.
“The effects of these developments and domestic energy prices on the inflation outlook through the cost channel and economic activity are being closely monitored,” the statement read.
Indicators point to a slowdown in economic activity, but the bank said “potential second-round effects of recent developments on the inflation outlook will be of importance.”
The tight monetary policy stance, it said, will strengthen the disinflation process through demand, exchange rate and expectation channels.
The cease-fire allowed the central bank “to refrain from tightening,” William Jackson, economist at Capital Economics, said in a note.
“So long as energy prices don’t spike again, we think the CBRT will opt to leave interest rates on hold for at least a few more months,” Jackson said.
The bank said the policy rate would be determined by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets.
“Monetary policy decisions are made prudently on a meeting-by-meeting basis with a focus on the inflation outlook,” the statement said.
The CBRT in February kept its end-2026 interim inflation target at 16% but lifted its forecast range to 15%-21% from 13%-19% previously.
Earlier on Wednesday, Treasury and Finance Minister Mehmet Şimşek said recent developments will impact Turkish inflation but the downward trend will not change.
Şimşek also said the current account deficit was expected to widen further this year due to the oil price shock, but that this was temporary.
The central bank reiterated the policy stance would be tightened in case of a “significant and persistent deterioration” in the inflation outlook, which can also be driven by the recent developments.
“The Committee reiterated that it remains highly attentive to upside risks on inflation,” the bank said.
The CBRT stands ready to support monetary transmission mechanism via additional macroprudential measures in case of unanticipated developments in credit and deposit markets, it added.
“Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively.”
Analysts at the Dutch financial giant ING said the rate decision implies an intention to move toward normalization as the bank does not see a need to introduce additional tightening … or to gain additional flexibility by adjusting the upper band of the interest rate corridor.
In the near term, they expect the bank to remain in a wait‑and‑see mode before deciding whether to reduce the effective cost of funding back toward the policy rate.
Consumer sentiment in Türkiye remained subdued but showed a slight improvement in April, official data from the country’s statistical office showed on Wednesday.
The consumer confidence index edged up to 85.5 from 85.0 in March, Turkish Statistical Institute (TurkStat) said, remaining below the 100 mark that separates optimistic and pessimistic outlook.
Expectations for households’ financial situation over the next 12 months improved, with the corresponding index rising to 87.5 from 85.6, the data revealed.
By contrast, views on the general economic outlook weakened, with that sub-index falling to 78.3 from 79.1.
The survey also showed a more positive assessment of spending on durable goods, with the relevant index increasing to 104.4 from 102.7.
The European Commission unveiled on Wednesday a series of measures to address the impact of surging energy prices on the region’s markets following the U.S.-Israeli war with Iran.
The commission said the measures – announced in a package called “AccelerateEU” – included optimizing the distribution of jet fuel between EU countries, in order to avoid shortages.
“The choices we make today will shape our ability to face the challenges of today and the crises of tomorrow. Our AccelerateEU strategy will bring both immediate and more structural relief measures to European citizens and businesses,” said European Commission President Ursula von der Leyen.
“We must accelerate the shift to homegrown, clean energies. This will give us energy independence and security, and mean we are better able to weather geopolitical storms,” she added.
Here’s how the European Union plans to respond.
Electricity first
Central to the EU proposals is a focus on reducing reliance on oil and gas to cushion against future fossil fuel supply disruptions and price spikes. The commission set out plans on Wednesday to change EU tax rules, to ensure electricity is taxed below natural gas, confirming draft plans previously reported by Reuters.
That aims to incentivize consumers and companies to replace systems running on gas with heat pumps and industrial machinery that runs on electricity.
The proposal will also make it easier for governments to cut energy-intensive industries’ and vulnerable households’ electricity taxes to zero, to curb bills in the near term.
Brussels will make legal proposals to amend the tax rules in May. EU tax rules are politically difficult to change because they require unanimous approval from all 27 member states.
Electricity taxes and levies in the EU are, on average, around twice as high as those for natural gas, according to analysis by think tank Strategic Perspectives.
The commission will also propose an electrification target before summer, to push industries to switch from fossil fuels to electricity.
Oil and gas stocks
The European Commission will coordinate countries’ efforts to fill gas storage in the coming months – including the timing of purchases.
The aim is to avoid price spikes, which could be caused by companies rushing to buy at the same time.
Gas storage is currently 31% full, but the EU requires this to rise to 80% ahead of winter, and companies have been slow to replenish stocks while prices are unusually high.
Brussels will also facilitate possible releases of oil stocks by coordinating the timing and volumes in the EU, the commission said. International Energy Agency (IEA) members – which include most EU countries – agreed last month to release 400 million barrels of oil from their reserves, in a bid to calm oil markets.
Jet fuel
The EU imports about 40% of its jet fuel, of which half comes via the Strait of Hormuz. Airports have warned Europe could face jet fuel shortages within weeks.
The commission will map Europe’s transport fuel supply and stocks and step in to optimise the distribution of fuel to avoid shortages, it said. It will also consider reviewing the EU’s requirement for countries to hold at least 90 days of oil stocks, to include a specific jet fuel requirement.
Brussels will draw up guidance on how to handle potential jet fuel shortages – on issues such as airlines losing airport slots due to cancellations and the EU’s anti-tankering rule, designed to prevent planes from loading extra fuel in cheap locations.
The European Commission will also map Europe’s refining capacity and introduce measures next month to ensure that existing capacity is fully used, it said.
‘Immediate relief’
The EU proposals include a list of recommendations to provide “immediate relief,” although it will be up to individual governments to take them up. They include delaying nuclear power plant closures, financial help to quickly install plug-in batteries and solar panels, and reducing the price of public transport.
State aid
Separately from the proposals published on Wednesday, the EU is preparing plans to let countries subsidize fuel and fertilizer prices more. In a draft of these temporary state aid rules, seen by Reuters, the EU would let governments subsidise up to 50% of fuel or fertilizer price increases companies have paid since the Iran war began.
In a bid to avoid massive, untargeted subsidies straining public budgets, only a few sectors will be eligible – including farming, fishing and road transport. The subsidies must be granted this year.
The draft EU plan would also allow a higher intensity of aid to help industries pay their power bills.
Türkiye’s stock exchange, Borsa Istanbul, has been accepted as a “Recognised Stock Exchange” by His Majesty’s Revenue and Customs (HMRC), the U.K.’s tax, payments and customs authority, the institution said in a statement on Wednesday.
“Aiming to make our capital markets more visible and accessible, particularly among U.K.-based investors, Borsa Istanbul, with this step, also contributes to efforts to increase foreign investors’ interest in our markets,” it said.
Moreover, with recognition of Borsa Istanbul, “it will be possible for investors resident in the United Kingdom to benefit from tax advantages on their investments in our capital markets,” it added.
“Income earned by holders of Individual Savings Accounts (ISA) from their investments in ‘Recognised Stock Exchanges’ is exempt from taxation in the United Kingdom,” the statement further said.
It also mentioned that lease certificates traded on such recognized exchanges are evaluated under the category of “Alternative Finance Investment Bonds” in the U.K., which it said, “simplifies investors’ decision-making and reporting processes and reduces the compliance burden.”
In addition, it suggested that a “Recognised Stock Exchange” is a designation attributed by His Majesty’s Revenue and Customs “to qualified exchanges that meet certain criteria,” explaining that it means that thereafter it is officially recognized within the scope of U.K. tax legislation.
Borsa Istanbul also provided a list of “Recognised Stock Exchanges,” including major exchanges operating in various countries, such as the “New York Stock Exchange,” “Nasdaq,” “Euronext,” “London Stock Exchange” and others.
Anadolu Agency (AA) reported earlier this month that Turkish authorities were weighing different incentives to draw global investors. The measures come amid ongoing global crises and reportedly include lowering corporate tax for manufacturer-exporters, while also special tax regimes for foreigners are said to be under consideration.
Turkish markets have managed to maintain the positive trend they built at the start of the year during the first quarter and throughout April, despite the conflict between the U.S., Israel and Iran.
Oil prices jumped on Wednesday, reversing earlier losses after reports of gunfire attacks on at least three container ships in the Strait of Hormuz and a lack of progress in peace talks between the U.S. and Iran.
Brent crude futures were up 73 cents, or 0.7%, at $99.21 a barrel at 1049 GMT. West Texas Intermediate futures were up 59 cents, or 0.7%, to $90.26. Both benchmarks climbed about 3% on Tuesday.
At least three container ships were hit by gunfire in the Strait of Hormuz on Wednesday. Iran’s Revolutionary Guards seized two vessels for what it described as maritime violations and transferred them to Iranian shores, the semi-official Tasnim news agency reported.
Iran and the U.S. have imposed restrictions on ships using the strait, which until the Iran war began at the end of February had carried about 20% of global oil and liquefied natural gas supplies.
Earlier, U.S. President Donald Trump said he would indefinitely extend the cease-fire with Iran, hours before it was due to expire. Neither side showed up for peace talks in Pakistan.
The cease-fire announcement appeared to be unilateral, and it was not immediately clear whether Iran, or U.S. ally Israel, would agree to extend the truce, which began two weeks ago.
A Liberia-flagged container ship was reported on Wednesday to have sustained damage to its bridge after being hit by gunfire and rocket-propelled grenades northeast of Oman.
The United Kingdom Maritime Trade Operations (UKMTO) said the master of the vessel reported being approached by an Iranian gunboat. The vessel, it said, was subsequently fired upon. All crew members were safe and there was no fire or environmental impact due to the incident.
Maritime security sources said that three people were onboard that gunboat.
The master of the Greek-operated container ship also reported that no radio contact was made prior to the incident and that the vessel had been initially informed that it had permission to transit the Strait of Hormuz.
The UKMTO later said that a second container vessel had been fired upon about eight nautical miles west of Iran. The Panama-flagged vessel was not damaged and its crew members are safe.
Maritime security sources said that a third container ship was fired upon about eight nautical miles west of Iran while transiting outbound of the Strait of Hormuz. The Liberia-flagged vessel, which was not damaged had stopped in the water. Its crew are safe, the sources said.
In Europe, Ukrainian President Volodymyr Zelenskyy said the Druzhba pipeline carrying Russian oil was ready to resume operations. Three industry sources, however, said Russia was set to stop oil exports from Kazakhstan to Germany via the pipeline from May 1.
Later on Wednesday, the U.S. Energy Information Administration is due to publish weekly inventory data. Crude stocks fell by 4.5 million barrels last week, while gasoline and distillate stocks also declined, market sources said, citing American Petroleum Institute figures.
Analysts estimated a 1.2 million-barrel draw of crude for the week ended April 17.
“If the EIA confirms the draws and U.S. weekly exports of both crude oil and refined products remain robust, this will be taken as confirmation that consumers in Europe and the Far East are scrambling to secure oil supplies wherever, whenever, and however they can,” PVM analysts said.
Shares of Deutsche Telekom slipped 1.5% on Wednesday after reports of potential merger talks between the German telecoms conglomerate and U.S.-based T-Mobile US, which would be the largest ever public merger if it goes ahead.
Details of the early-stage talks were reported by Reuters, which cited two sources familiar with the matter on Wednesday. Telekom, which already holds a majority 53% stake in T-Mobile, did not respond to a request for comment.
Bloomberg first reported the potential deal.
Any combination, which would need buy-in from Germany, which is Deutsche Telekom’s single biggest shareholder, would create the world’s biggest wireless operator by market capitalization, with operations spanning the United States and Europe.
T-Mobile’s market value is about $218 billion, while Deutsche Telekom has a valuation of about $166 billion.
While the discussions are at a preliminary stage, the proposed idea is for a new holding company that would make a stock bid for both companies, owned by existing investors, and then list in the U.S. and Europe, Bloomberg said.
The German stake is roughly split between the government and state-lender KfW, whose stake could be diluted in a merged entity.
The deal would create a giant firm with potentially greater liquidity, which could also be useful for future dealmaking, according to a person familiar with the matter, speaking on condition of anonymity because the matter is private.
T-Mobile’s stock has lost a quarter of its value in the last year, while Deutsche Telekom’s shares have lost 10%.
Inflation in the U.K. jumped to 3.3% in March from 3.0% in February, official data showed on Wednesday, driven mainly by a notable rise in energy prices following the start of U.S. and Israel’s war with Iran.
Factory gate prices also jumped and by much more than expected, the figures from the Office for National Statistics (ONS) revealed.
Economists said the increases – driven largely by fuel – were unlikely to push the Bank of England’s (BoE) Monetary Policy Committee (MPC) to raise interest rates as soon as next week’s meeting, and the key question was whether the jump in energy prices would ignite a broader inflation problem.
“Inflation will probably fall to 2.9% in April as the big hikes in regulated prices drop out of the annual comparison,” said Ruth Gregory, deputy chief U.K. economist at Capital Economics.
“But the next eight months will be an uncomfortable ride for the MPC.”
Economists polled by Reuters had mostly expected the headline consumer price inflation rate to accelerate to 3.3%, driven by a rise in petrol and other fuel costs in March.
The price of motor fuels jumped by 8.7% on the month, the biggest rise since June 2022, shortly after Russia’s full-scale invasion of Ukraine, the ONS said.
The data showed services price inflation – which the BoE watches closely as a sign of longer-term inflation pressures – rose unexpectedly to 4.5% from 4.3% in February.
But much of that increase was due to a rise in air fares driven by the timing of the Easter holidays.
Core inflation, which excludes more volatile food, energy, alcohol and tobacco prices and is also watched closely by the BoE, weakened to 3.1% from 3.2% in February.
War impact
Before the U.S.-Israeli war on Iran began on Feb. 28, the BoE said Britain’s inflation rate – the highest among the G-7 economies for much of the last four years – was likely to be close to its 2% target in April.
But last month, the BoE sharply increased its inflation forecast due to the energy price shock, predicting it would rise toward 3.5% by the middle of 2026.
The International Monetary Fund (IMF) last week predicted British inflation would peak at 4% in the coming months.
However, the BoE’s interest rate-setters have mostly said it is too soon to know what the rise in headline inflation will mean for underlying price pressures in the economy, given the weak jobs market, which could make it harder for workers to demand higher pay or for businesses to pass on higher costs.
The British central bank is expected to keep borrowing costs on hold on April 30 at the end of its next scheduled Monetary Policy Committee meeting.
Financial markets on Wednesday were betting on one or possibly two quarter-point interest rate rises by the BoE this year. But a Reuters poll of economists showed most expected no change in borrowing costs during 2026.
The ONS figures showed cost inflation reported by manufacturers, some of which will filter through into consumer prices, soared last month.
Producer input price inflation leapt in March alone by 4.4%, the second biggest monthly increase since records began in 1984, behind only the increase in March 2022 due to the energy price shock spurred by the invasion of Ukraine.
Producer prices charged by services firms rose by 3.0% in the first quarter, up from 2.8% in the fourth quarter, the highest reading since the third quarter of 2024.
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