Turkey's Central Bank Raises Policy Rate to 37%
Shift to orthodox funding signals tighter monetary stance
Turkey's central bank is keeping its key policy rate at 37 percent while resuming weekly repo auctions at the same rate. The move changes how the banking system is supplied with central bank liquidity, but it does not represent a new interest-rate hike. Markets are watching the decision closely as Turkey continues its fight against high inflation and seeks to strengthen confidence in its monetary policy.
Repo auctions return at 37 percent
The Central Bank of the Republic of Türkiye has resumed weekly repo auctions, allowing banks to obtain one-week funding directly at the policy rate of 37 percent. The central bank had previously relied more heavily on other liquidity-management tools.
The one-week repo rate has remained at 37 percent since January 2026, when the central bank reduced it from 38 percent. The rate was subsequently left unchanged at its March, April, June and July meetings. The overnight lending rate remains at 40 percent, while the overnight borrowing rate stands at 35.5 percent.
Monetary policy remains restrictive
The return of weekly repo auctions should not be confused with a new rate increase. The key change concerns the way the central bank provides liquidity to commercial banks. The official policy rate remains unchanged at 37 percent.
The central bank continues to pursue a restrictive monetary policy. Its objective is to bring inflation down while keeping inflation expectations under control. High interest rates, however, also increase financing costs for companies and households and can weigh on domestic demand.
Inflation remains the main challenge
Turkey continues to face exceptionally high inflation despite the disinflation process of recent years. The central bank has therefore been cautious about further rate cuts and has kept its policy rate unchanged since January.
Energy prices and geopolitical developments are additional risks for the inflation outlook. Higher energy costs can feed through into transportation, production and consumer prices, making it more difficult for the central bank to achieve a sustained decline in inflation.
What the policy means for the Turkish lira
The interest-rate strategy is closely linked to the outlook for the Turkish lira. High domestic interest rates can increase the attractiveness of lira-denominated assets and may help support the currency. At the same time, exchange-rate developments depend heavily on inflation expectations, investor confidence and the credibility of economic policy.
For the central bank, the challenge is therefore to maintain sufficiently tight financial conditions without placing excessive pressure on economic activity. A credible monetary policy could help improve confidence in the lira over the medium term.
Why it matters for Switzerland
The developments in Turkey are also relevant for Switzerland. Switzerland and Türkiye maintain extensive economic and business ties, with bilateral trade exceeding CHF 10 billion in 2024 when gold is included. Türkiye is also considered an important market for Swiss companies, particularly because of its large domestic economy and its position between Europe, Asia and the Middle East.
Swiss companies operating in Turkey can be affected by changes in local financing costs and exchange rates. Higher Turkish interest rates can make borrowing more expensive for local subsidiaries and business partners, while a more stable lira could make financial planning and investment decisions easier.
The exchange rate is also important for Swiss exporters. A significant depreciation of the lira can make Swiss products and services more expensive for Turkish customers. For companies importing goods or generating revenue in Turkey, however, currency movements can have very different effects depending on how their operations are structured.
Implications for Swiss investors
Swiss investors with exposure to Turkish bonds, equities or companies also need to consider both interest rates and currency movements. Higher yields can make Turkish assets more attractive, but the potential return must be weighed against inflation and exchange-rate risks.
A sustained improvement in monetary-policy credibility could support foreign investor confidence. However, the high level of inflation means that risks remain significant. The central bank's ability to maintain a consistent policy stance will therefore remain an important factor for international investors.
What comes next?
The central bank is expected to continue monitoring inflation, domestic demand, exchange-rate developments and international energy prices before deciding on further changes to monetary policy.
The resumption of weekly repo auctions at 37 percent is therefore mainly a change in liquidity management rather than a new tightening of interest rates. The key question for markets is whether Turkey can maintain sufficiently restrictive monetary conditions while gradually bringing inflation under control.
For Swiss companies and investors, the development of the Turkish lira and the country's monetary-policy credibility will remain particularly important. A more stable macroeconomic environment could strengthen bilateral business relations, while persistent inflation and currency volatility would continue to create challenges.
Turkey's monetary-policy course has therefore become relevant well beyond its domestic financial system. Its effects are being watched by international investors and by companies operating between Turkey and markets such as Switzerland.
