Economy
Turkish central bank cuts key rate to 39.5%, flags inflation risk
The Turkish central bank cut its benchmark, one-week repo rate by 100 basis points to 39.5% on Thursday, citing an increase in the underlying trend of inflation in September and flagging “a slowdown” in the disinflation process.
The Central Bank of the Republic of Türkiye (CBRT) met the market expectations for a slower reduction this month in the face of a surprise uptick in inflation after months of declines.
At its previous meeting in September, the bank had already tapped the brakes with a 250-point cut in the face of higher-than-expected inflation and heightened political risk. A 300-point cut was made in the meeting before that, in July.
The bank on Thursday also lowered the overnight lending rate from 43.5% to 42.5% and the overnight borrowing rate from 39% to 38%.
“The underlying trend of inflation increased in September,” the central bank said in its statement after its Monetary Policy Committee (MPC) meeting.
“While recent data suggest that demand conditions are at disinflationary levels, they also point to a slowdown in the disinflation process,” it said.
“The risks posed by recent price developments, particularly in food, to the disinflation process through inflation expectations and pricing behavior have become more pronounced,” it added.
The lira was little changed at 41.9850 versus the greenback after the announcement.
In a Reuters poll, the majority of 17 economists forecast a cut in the one-week repo rate, with the median forecast being a 100 basis-point cut. Four economists expected rates to be unchanged.
“The step size is reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook,” the bank also said, repeating that its policy stance will be tightened in case the inflation outlook deviates significantly from interim targets.
The bank in August switched to a new system by introducing interim targets, separating them from its inflation forecast ranges in a new strategy aimed at boosting transparency and confidence. It set the inflation target for this year at 24%, even though it is forecasting inflation of between 25% and 29%.
Annual inflation ticked up slightly to 33.29% in September, breaking a long declining trend observed since the middle of 2024 and triggering predictions of a slowdown in the monetary easing cycle. Economists’ expectations varied from no cut to a 250-basis-point cut this month, although most anticipated the bank would lower rates by 100 or 150 basis points.
“It’s basically in line with the adjusted market expectations (of a smaller cut following the September inflation print), so it should be enough not to scare the market at this stage,” said Kieran Curtis, head of EM local currency debt at fund manager Aberdeen.
Earlier in April, the CBRT hiked rates to 46%, reversing an easing cycle that had begun in December, following market volatility over the March arrest of Istanbul Mayor Ekrem Imamoğlu.
While economists expected a slowdown in easing this month, they also expect rate cuts to likely continue in this year’s last meeting in December.
The Turkish competition watchdog on Monday said it had launched an investigation into 19 companies operating in Türkiye’s health insurance market over allegations that they may have coordinated premium pricing.
The probe follows a preliminary inquiry based on complaints and tip-offs alleging that health insurance companies may have jointly determined, increased or fixed premiums, the Competition Authority (RK) said in a statement.
The board is also examining allegations that companies may have shared customers, regions or products, exchanged sensitive information such as pricing, costs and risk data, and entered into exclusionary agreements with health care providers.
Among the companies named in the investigation are Allianz Sigorta, Anadolu Sigorta, Aveon Global Sigorta, AXA Sigorta, Hepiyi Sigorta, Zurich Sigorta, Acıbadem Sağlık Hizmetleri and Memorial Sağlık Yatırımları.
Other companies reportedly included in the investigation include Medisa Sigorta, a subsidiary of Agesa Hayat ve Emeklilik.
Several companies, including Anadolu Sigorta, said in regulatory filings that the launch of an investigation does not mean the firms have violated competition law or will necessarily face penalties.
Israel has incurred around $15 billion in costs since the start of its attacks on Iran and Lebanon, with the figure expected to rise as fighting continues and the economic repercussions deepen, according to a report by an Israeli newspaper on Sunday.
The Calcalist business daily said the cost of the ongoing wars with Iran and the Hezbollah group has reached around 47 billion shekels, or $15 billion.
The newspaper said the Israeli Defense Ministry has requested around 39 billion shekels, equivalent to $12.4 billion, to cover military expenditures, with the amount expected to increase if the war continues or similar rounds of fighting recur.
According to the daily, the wars have increased the likelihood of a long-term rise in Israel’s security budget rather than the reductions previously expected amid preparations for possible future confrontations with Iran and Hezbollah.
On the civilian side, the paper said around 26,000 compensation claims have been filed for missile-related damage, estimated at between 1 billion and 1.5 billion shekels, or $320 million to $479 million.
However, it said the main burden stems from a compensation plan for businesses and workers estimated at between 6.5 billion and 7 billion shekels, or $2.1 billion to $2.23 billion.
The report added that around half a billion shekels, or $160 million, would also be needed to cover workers placed on unpaid leave.
The newspaper said the Israeli government is likely to push for easing restrictions on economic activity in an effort to limit losses and reduce the war’s impact on the economy.
The war began after the U.S. and Israel launched a joint offensive on Iran on Feb. 28, triggering weeks of missile exchanges and military escalation that have killed more than 1,340 people, including then-Iranian Supreme Leader Ayatollah Ali Khamenei.
At the same time, Israel has expanded its military campaign in Lebanon following a cross-border attack by Hezbollah on March 2, carrying out airstrikes and a ground offensive despite a cease-fire that took effect in November 2024.
Another Turkish-owned crude oil vessel has safely crossed the Strait of Hormuz, Transport and Infrastructure Minister Abdulkadir Uraloğlu said on Monday, bringing the number of departed ships to three since the U.S.-Israel war on Iran began.
The exit comes days after Türkiye said it was in contact with Iran and is looking for permission for Turkish-owned ships to pass through the key waterway that has been effectively shut since late February.
The second vessel transited the strait, through which a fifth of global oil and liquefied gas supplies normally pass on a daily basis, days ago, while the first made an exit last month.
Iran has curtailed traffic in the Strait of Hormuz since the U.S.-Israeli strikes started on Feb. 28, sending global oil and gas prices soaring. But it has appeared to allow passage for vessels from countries it deems more friendly.
“As a result of the work we are conducting with our Ministry of Foreign Affairs, the Turkish-owned vessel named Ocean Thunder, which was en route carrying crude oil loaded from Iraq to Malaysia, safely passed through the Strait of Hormuz as of last night and completed its exit from the Gulf,” he wrote.
The number of Turkish-owned vessels around the strait has decreased to 12, Uraloğlu said in a social media post on Monday.
He said the number of vessels requesting exit has decreased to eight. Uraloğlu added efforts were under way to ensure the safe transfer of the eight ships that wish to depart from the region and the 156 personnel serving on these vessels.
U.S. President Donald Trump threatened to rain “hell” on Tehran if it did not make a deal by the end of Tuesday and reopen the Strait of Hormuz.
Oil prices fell more than $2 in choppy trade on Monday, as investors awaited clarity on the status of talks between the Washington and Tehran and remained wary about sustained supply losses due to shipping disruptions.
Brent crude futures fell $1.92, or 1.76%, to $107.11 a barrel at 1037 GMT. U.S. West Texas Intermediate crude futures were trading down 1.82%, or $2.03, at $109.50 per barrel.
Domestic markets in Türkiye have managed to maintain the positive momentum they built at the start of the year during the first quarter, with Turkish equities emerging among the best-performing global markets despite pressure from geopolitical tensions in the Middle East.
The BIST 30, which tracks the largest and most liquid companies on Borsa Istanbul Stock Exchange (BIST), rose 18.77% in the first quarter after ending 2025 at 12,223.61 points and climbing to 14,518.03 points by the end of March.
That performance placed the index among the world’s top 10 best-performing benchmark indices during the quarter.
In dollar terms, the BIST 30 also gained 14.7%, making it one of the strongest-performing stock indices globally at a time when many major markets in the United States, Europe and Asia posted declines.
The broader BIST 100 also advanced strongly, rising 13.6% in the first quarter to end March at 12,790.98 points, compared with 11,261.52 points at the end of last year.
The BIST 100 surged 22.9% in January alone, recording its strongest monthly performance since November 2022.
Foreign investor inflows and continued reserve accumulation by the Central Bank of the Republic of Türkiye (CBRT) helped push the BIST 100 to a record high of 14,532.67 points in February.
Investor sentiment was also supported by continued guidance from policymakers that the disinflation process would remain firmly in place.
Iran war weighs on global markets
The conflict in the Middle East, triggered by attacks by the United States and Israel on Iran and subsequent Iranian retaliation, created heavy selling pressure across global markets in March.
The rise in geopolitical risks is estimated to have wiped about $14 trillion from the value of global financial markets over the past month.
Concerns over disruption to the Strait of Hormuz, a key chokepoint for global energy supplies, pushed oil prices higher and altered inflation expectations as well as the outlook for central bank policy worldwide.
Markets grew increasingly concerned that major central banks, led by the U.S. Federal Reserve (Fed), could adopt a more hawkish stance in response to higher energy prices and inflationary pressures.
The stronger inflation outlook boosted the dollar against other currencies, while global bond markets also came under pressure.
The yield on the benchmark 10-year U.S. Treasury note climbed to 4.49%, its highest level since July 2025, while the dollar index remained firmly above 100.
CBRT acts to ease pressures
Against this backdrop, Türkiye’s economic management was seen as relatively resilient thanks to swift policy action and an ability to respond quickly to global volatility.
The CBRT introduced new measures aimed at improving Turkish lira liquidity conditions in the banking system.
The bank launched foreign exchange-backed lira swap transactions in order to provide banks with greater flexibility in managing lira liquidity.
The move is intended to limit volatility in both credit and interest rates, while also easing pressure on the lira.
Officials expect the measure to prevent a tightening in lira liquidity, support banks facing funding pressures and contribute to more balanced lending conditions.
The measure is also viewed as important for both supporting liquidity in the banking sector and strengthening foreign exchange reserves, as the central bank effectively injects lira liquidity by purchasing foreign currency from banks in exchange for lira.
The war in Iran risks oil and commodity price shocks that could keep inflation sticky and push interest rates higher than the market now expects, JPMorgan Chase CEO Jamie Dimon warned Monday.
The warning came in an annual letter to shareholders a day after U.S. President Donald Trump ratcheted up pressure on Iran, threatening to target its power plants and bridges Tuesday if it does not reopen the Strait of Hormuz, a key waterway.
Dimon, 70, who has run JPMorgan, the largest U.S. bank, for two decades, also said the private credit sector “probably” does not present a systemic risk, despite investors’ recent moves to pull back from such funds amid worries that advances in AI will hurt underlying borrowers.
“The challenges we all face are significant,” Dimon added, citing geopolitical risks such as the war in Ukraine, broader hostilities in the Middle East and tension with China.
“Now, because of the war in Iran, we additionally face the potential for significant ongoing oil and commodity price shocks, along with the reshaping of global supply chains, which may lead to stickier inflation and ultimately higher interest rates than markets currently expect.”
Time will tell whether the Iran war achieves the United States’ objectives, Dimon said, adding that nuclear proliferation remains the greatest danger from Iran.
War-driven inflation worries have led markets to largely rule out interest rate cuts this year, after monetary easing fueled record equity highs last year.
Last week, the benchmark S&P 500 index closed its worst-performing quarter since 2022, weighed down since late February by the war and the resulting spurt in energy prices.
Dimon said the U.S. economy continued to be resilient, with consumers still earning and spending, though with some recent weakening, and businesses still healthy.
But he cautioned the economy had been fueled by large amounts of government deficit spending and past stimulus, while increased expenditure on infrastructure remained a growing need.
The fiscal stimulus from Trump’s “Big, Beautiful Bill,” deregulation policies and artificial intelligence-driven capital spending are other positives for the economy, Dimon said.
Private credit may not be systemic risk
Dimon said the $1.8 trillion private credit market is relatively small. But once the credit cycle weakens, he warned, losses on all leveraged lending will be higher than expected as credit standards have been weakening modestly across the board.
Private credit also does not tend to have great transparency or rigorous valuation loan “marks,” increasing the chance that investors will sell if they think the environment will worsen, he said.
Blue Owl last week told investors it was limiting withdrawals from two funds after a historic level of first-quarter redemption requests, with AI-related worries driving an investor exodus from its technology-focused fund.
Dimon also used the letter to sharply criticize revised capital rules proposed by U.S. bank regulators last month, decrying some aspects as still “nonsensical.”
JPMorgan was among the banks that fought hard to water down 2023 drafts of the so-called Basel III and GSIB, or Global Systemically Important Banks, surcharge rules.
But on Monday, Dimon said the proposals were still “very flawed,” adding that JPMorgan’s GSIB surcharge – an extra capital layer held by such banks – would only fall to 5%, a figure he said punished its success and was “absurd” and “un-American.”
Türkiye and Syria are set to hold a series of meetings this week aimed at deepening economic ties and paving the way for a new level in trade after Ankara added Syria to its target export markets list this year.
Trade between the two countries gained momentum after the ouster of longtime dictator Bashar Assad in late 2024, as the neighboring countries also seek broader cooperation in areas including industry, transportation and energy.
The pace has been accelerated alongside diplomatic contacts. This weekend, Foreign Minister Hakan Fidan visited Syria, where he met Syrian President Ahmed al-Sharaa.
The meetings focused on regional developments and security issues, as well as ways to strengthen bilateral ties and expand economic cooperation.
JETCO meeting, investment forum
The first meeting of the Türkiye-Syria Joint Economic and Trade Committee, or JETCO, is scheduled to take place on Tuesday.
The meeting is expected to be co-chaired by Trade Minister Ömer Bolat and Syrian Economy and Industry Minister Nidal al-Shaar.
A Türkiye-Syria Business and Investment Forum will also be held with the participation of business representatives from both countries.
The forum is expected to bring together companies from the energy, construction, health care, food, agriculture, livestock, logistics, education and textile sectors for bilateral meetings.
Panels on logistics, banking and contracting are also planned.
Exports rise sharply
The growing engagement is expected to strengthen cooperation across multiple sectors and open the way for new records in bilateral trade.
Syria was added to Türkiye’s list of target export markets this year.
Türkiye’s exports to Syria rose by nearly 60% in 2025 to $3.5 billion, up from $2.2 billion a year earlier.
The largest export category last year was milling products, malt, starches, inulin and wheat gluten, totaling $232.7 million.
Exports continued to accelerate following the collapse of the former regime.
In the first two months of this year, exports climbed a further 26.7% on an annual basis to more than $666.7 million.
That marked the highest January-February export figure to Syria since the Turkish Statistical Institute (TurkStat) began publishing the data in 2013.
Motor vehicles, tractors, bicycles, motorcycles and related parts and accessories ranked as the top export category in the first two months of the year, with shipments totaling $72.7 million.
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