Central Bank cuts interest rates for the first time in 10 months
Istanbul, October 25 (HNA) – The most significant development of the week was the Central Bank’s decision, at its meeting on 22 October, to cut interest rates for the first time since January. The Central Bank of the Republic of Turkey (CBRT) Monetary Policy Committee (MPC) reduced the one-week repo auction rate—the policy rate—by 100 basis points to 36 per cent.
In the announcement regarding interest rates, it was reported that the Committee, chaired by Central Bank Governor Fatih Karahan, had cut the policy rate by 100 basis points to 36 per cent. Having last cut interest rates at its January meeting, the Central Bank has thus reduced the policy rate for the first time in five meetings.
The announcement, which stated that the Central Bank’s overnight lending rate had been reduced from 40 per cent to 39 per cent and the overnight borrowing rate from 35.5 per cent to 34.5 per cent, it was stated that “despite monthly fluctuations, recent inflation figures and leading indicators confirm the downward trend”.
Whilst expectations of interest rate hikes are strengthening in the world’s major economies – the US, Europe and Japan – in response to the threat of inflation in the global economy, Turkey has cut interest rates for the first time in 10 months. Having lowered its policy rate from 38 per cent to 37 per cent in January 2026, the Central Bank had suspended further rate cuts following the outbreak of the Iran conflict on 28 February.
CBRT: The downward trend in inflation continues
In a written statement issued by the CBRT regarding the interest rate decision, it was emphasised that, despite monthly fluctuations, the latest data and leading indicators point to a continued decline in inflation. The statement noted that the upward risks to the inflation outlook posed by persistently high energy prices, driven by ongoing geopolitical tensions, remain; it was also noted that the scale and timing of future measures would be determined through an ‘inflation-focused, meeting-by-meeting and prudent approach’.
The announcement noted that, whilst data on economic activity and the limited impact of supply shocks on domestic prices indicated that the weak trend in domestic demand was continuing, the upward risks to the inflation outlook posed by high energy prices—resulting from ongoing geopolitical tensions—persisted.
The statement emphasised that the effects of geopolitical developments on the inflation outlook via the cost channel, economic activity and the expectations channel are being closely monitored, and included the following assessments:
“The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process via the demand, exchange rate and expectations channels. The Council will determine the steps to be taken regarding the policy rate, taking into account inflation outcomes, the underlying trend and expectations, in a manner consistent with the intermediate targets and ensuring the degree of tightness required for disinflation. The magnitude and timing of these steps will be determined through an inflation-outlook-focused, meeting-by-meeting and prudent approach. Should there be a significant and persistent deterioration in the inflation outlook, the monetary policy stance will be tightened. The Council has emphasised its cautious stance against upside risks to inflation.”
The likelihood of reducing the policy rate to 35 per cent by the end of the year
Speaking to DW Türkçe, Prof. Dr Sinan Alçın, Chair of the Istanbul Economic Platform, pointed out that whilst the CBRT had begun 2026 with an appetite to cut interest rates, it had been forced to keep rates on hold for almost the entire year due to the war in Iran.
However, noting that annual inflation fell below 30 per cent in September for the first time in nearly five years, Prof. Alçın stated: “Nevertheless, the pressure caused by the entrenched stagnation in the real economy and cash flow difficulties has created the possibility of the Central Bank cutting the policy rate to 35 per cent by the end of the year. “In other words, there could be a one-point cut in the final interest rate decision of the year in December,” he said.
“A cautious cut in the shadow of the funding crisis”
Commenting on the Central Bank’s interest rate cut to BBC Turkish, Prof. Dr Selva Demiralp noted that with its latest decision, the Central Bank had resumed its cycle of interest rate cuts from where it left off, stating:
“The direction of this decision, which I have characterised as ‘a cautious cut in the shadow of the funding crisis’, came as no surprise.” Central Bank Governor Fatih Karahan had stated at the Inflation Report meeting on 13 August that keeping interest rates steady whilst inflation and expectations were improving would, in fact, amount to monetary tightening.
In September, annual inflation fell by approximately 2 percentage points (from 31.5 per cent to 29.7 per cent). In this situation, it was theoretically possible to lower the policy rate by around 2 percentage points to around 35 per cent in order to preserve the real interest rate. However, the Central Bank limited the cut to 100 basis points, and the real interest rate rose by more than half a percentage point. In other words, whilst the Central Bank cut interest rates today, from the perspective of the real interest rate, it has tightened its stance somewhat.
I believe the main reason for this caution is the funding crisis. So what does this mean? Higher interest rates mean a slower-growing economy. Consequently, even if public funds are not used to make payments to fund providers, the funding crisis still carries a cost. We saw this cost reflected quite clearly in today’s decision: higher borrowing costs and a slower-growing economy. The role of the financial system is to channel funds from those with a savings surplus to those with a deficit. In countries like Turkey, where confidence is weaker, the bulk of this transfer is carried out through banks. As countries develop, the share of capital markets increases, and money begins to circulate more quickly and healthily. The funding crisis has dealt a serious blow to Turkey’s capital markets, which have been the subject of years of effort to deepen.”
Other key developments of the week are as follows:
Is ‘Made in Europe’ becoming a pipe dream for Turkey?
Despite all efforts, Turkey’s chances of being included in the EU’s ‘Made in Europe’ industrial policy programme are dwindling. Turkey’s exclusion from the automotive sector will result in losses amounting to billions of dollars in exports.
According to an exclusive report by Aram Ekin Duran of Deutsche Welle Turkey, Turkey’s exclusion from the EU’s ‘Made in Europe’ programme will result in losses amounting to billions of euros in exports. Whilst the leaders of Germany and France have reached an agreement to exclude Turkey from the automotive sector, representatives of the Turkish government and business community are voicing their opposition to this decision. The Turkish side describes its exclusion from the EU market – with which it has recorded foreign trade exceeding 200 billion dollars as of the end of 2025 – as “unacceptable”.
Whether Turkey, which exports more than 40 per cent of its total exports to EU member states, will be included under the ‘Made in Europe’ scheme will be clarified by the ‘Industrial Acceleration Bill’ proposal, which is set to take its final form in the coming months. For now, however, the current outlook does not look promising for Turkey. According to experts, the rise to power of far-right parties in countries such as Germany, France, Italy and Spain – which are the driving forces of the EU economy – could further weaken Turkey’s commercial and diplomatic relations with the EU in the coming period.
Turkey’s visit to Brussels proved fruitless
The “Made in Europe” initiative, designed to bring industrial production back to Europe in response to the Chinese threat and featuring special support and incentives for products manufactured within the EU, had taken concrete form with the European Commission’s “Industrial Acceleration Act” proposal drafted in March.
The incentives to be provided under “Made in Europe” include tax advantages for electric vehicle production, priority in public procurement, and R&D support for battery production. The initial draft legislation had stipulated that products from countries which are not EU members but are members of the Customs Union could also be included under the “Made in Europe” scheme under certain conditions. However, the situation changed abruptly.
Just as Turkey – the largest country that is a member of the Customs Union but not of the EU – was sending a delegation comprising leading figures from its economic management and business community to Brussels on 13–14 October, a surprise announcement from Germany and France jeopardised Turkey’s position within the “Made in Europe” initiative.
At the summit held in Brussels on 13–14 October 2026, organised by the Foreign Economic Relations Board (DEİK) and the Turkey–Europe Business Councils in collaboration with the European Business Summit (EBS), messages emphasised the establishment of new bridges between economic cooperation and commercial diplomacy between Turkey and the EU within the framework of ‘Made In Europe’, whilst Turkey’s support for the EU’s competitiveness through “Made In Europe” was emphasised
S&P: Inflation at 30.9 per cent, growth at 3 per cent in 2026
According to S&P Global Ratings’ analysis of Turkey, the energy price shock resulting from the war in the Middle East is expected to exert upward pressure on inflation in Turkey. In this context, it is forecast that inflation in Turkey will average 30.9 per cent this year and stand at 21.7 per cent in 2027.
Economic growth in Turkey is expected to reach 3 per cent this year, compared to last year’s level of 3.7 per cent. Due to the war in the Middle East, this year’s growth forecast is 0.4 percentage points below the institution’s previous estimates. Economic growth is expected to pick up again in 2027, reaching 3.7 per cent.
“The war’s upward impact on inflation: 7 percentage points”
Presenting the Draft Central Government Budget Act for 2027 and the Draft Central Government Final Accounts Act for 2025 to the Turkish Grand National Assembly’s Planning and Budget Committee, Vice-President Cevdet Yılmaz stated that per capita national income is expected to rise to 20,523 dollars in 2026, $22,285 in 2027 and $23,419 in 2028, adding, “We have also set our goods export target for 2027 at $292 billion.”
Yılmaz noted that the ongoing war in the Middle East is creating additional pressure on the disinflation process through global commodity prices – particularly energy – and supply chains, adding, “It is estimated that these developments could have an upward impact of approximately 7 percentage points on actual inflation figures. It is estimated that approximately 5 points of this impact stem from the direct and indirect cost implications of rises in energy and other commodity prices, whilst the remainder may be linked to broader transmission channels,” he said.
Sharp fall in consumer confidence, lowest in 9 months
The fund crisis, which emerged when issues in certain funds came to public attention in mid-September, quickly had a negative impact on consumers’ economic expectations.
According to TÜİK’s consumer confidence index data for October, the index value, which stood at 91.9 in September, fell by 7.7 per cent to 84.8 in October, reaching its lowest level in the last nine months. An index value above 100 indicates that consumers are ‘optimistic’ about the economy, whilst a value below 100 indicates they are ‘pessimistic’.
During the current period, the household financial situation index fell to 68.3, whilst the index for expectations regarding the household’s financial situation over the next 12 months dropped to 86.4. The general economic outlook index fell to 81.7 this month, whilst the intention to spend on durable consumer goods over the next 12 months also fell to 102.7.
Fund bill passed by Parliament
A bill containing regulations regarding certain investment funds slated for liquidation was passed by the Grand National Assembly of Turkey (TBMM) General Assembly and has become law. The nine-article bill began to be debated in the Parliament’s General Assembly on 21 October, and the first five articles were adopted on the same day.
According to the regulation adopted by the TBMM, the liquidation process will be conducted under the supervision of the Capital Markets Board (SPK); fund unit ownership will be determined on the basis of the records of the Central Securities Depository Inc. Under the law, interim payments may be made in funds designated by the SPK, taking into account investors’ net investment amounts. Furthermore, subject to certain conditions being met, investors may receive an interim payment of up to 1 million TL, to be deducted from the final payment. These payments will be based on investors’ ‘net investment amount’. The portfolio management company, as the fund’s founder and/or manager, will bear primary responsibility for any loss or damage.
MSCI shock on the stock market
MSCI, which had previously warned Turkey ahead of the fund crisis, has this time frozen its index changes. The organisation stated that, should the necessary steps not be taken, Turkey would be downgraded from the emerging markets category. Following MSCI’s warning, the Istanbul Stock Exchange was dragged into a new wave of selling.
7th Fund Co-ordination Council Meeting: Number of funds in liquidation falls to 47
The Seventh Fund Co-ordination Council Meeting was held under the chairmanship of Deputy President Cevdet Yılmaz. A written statement issued following the meeting revealed that the number of funds in the liquidation process had fallen from 131 to 47.
7 out of 10 people are living on credit
Eighty per cent of the population – that is, 8 out of every 10 people – are struggling to make ends meet. Bekir Ağırdır, Chairman of the Board of the Data Institute, noted that 80 per cent of the population are hunting for bargains out of a need to survive, stating, “Citizens are no longer just looking for the cheapest supermarket; they’re now asking where they can find the cheapest bulgur.” Ağırdır drew attention to the income gap, stating that in the top 20 per cent, per capita income stands at 50,000 dollars, whilst in the bottom 20 per cent it is 3,000 dollars – that is, below the poverty line.
Responding to questions from the Nefes newspaper, Ağırdır said, “There is currently a social psychology in Turkey that has resigned itself to mediocrity. What we call a ‘dream’ is now simply having a home, an income or a pension. Seventy per cent of the country is in debt, and 70 per cent are still open to taking on further debt. Of these, 38 per cent are seeking to borrow to pay off last month’s debt, whilst 32 per cent are doing so to cover this month’s running costs; not to replace a sofa or a fridge,” he said.
1.9 trillion lira to be allocated to Treasury-guaranteed projects
A significant budget item has once again been set aside for guaranteed-payment bridges, motorways, tunnels and city hospitals implemented under Build-Operate-Transfer (BOT) and Build-Lease-Transfer models. According to a report in the Nefes newspaper, payments for bridges, motorways, tunnels and city hospitals implemented under BOT models are estimated at 296.8 billion lira in 2027, 354.7 billion lira in 2028 and 381.8 billion lira in 2029.
According to Ulaş Karasu, MP for Sivas from the New Party, a total of 816 billion lira – equivalent to approximately 31.5 billion dollars – was paid from the public budget for these projects between 2017 and 2026. The situation is set to become even more burdensome in the coming years. The projected payments are estimated at 296.8 billion lira in 2027, 354.7 billion lira in 2028 and 381.8 billion lira in 2029. The total for these three years alone exceeds 1 trillion lira. When the period from 2017 to 2029 is considered as a whole, it is stated that payments will reach approximately 1.9 trillion lira. Based on the exchange rate forecasts in the Medium-Term Programme (MTP), this amount will be equivalent to approximately 50 billion dollars.
The price per litre of petrol has fallen by 7 lira 60 kuruş in a week
Due to global market movements and changes in exchange rates, a further reduction of 3 lira 30 kuruş was applied to petrol prices on Thursday 22 October. This brings the total reduction in petrol prices over the course of a week to 7 lira 60 kuruş. The retail prices per litre for petrol, diesel and LPG in the European side of Istanbul were as follows:
Petrol: 76.30 TL
Diesel: 96.80 TL
LPG: 41.20 TL
JP Morgan brokerage firm decision: three-month period for clients
JP Morgan Securities, a subsidiary of the US-based JP Morgan Bank, has decided to apply to the Capital Markets Board to cease its operations. According to a statement made by JP Morgan Securities to the Public Disclosure Platform (KAP), the company will cease its capital markets activities and lose its status as a brokerage firm once approval is granted.
In a statement issued by the CMB, provisions were set out regarding customers who claim to have rights or claims arising from investment services, capital market activities or ancillary services provided by JP Morgan Securities. Customers making such claims must submit the relevant documents in their possession to both the company and the CMB within three months of the date of the announcement.
Turkey is preparing for COP31; it will contribute 4 billion dollars
Turkey is preparing to host the United Nations Climate Change Conference (COP31), one of the largest events in the history of climate diplomacy and international organisations. The climate summit will contribute a total of 4 billion dollars to the Turkish economy, 2 billion dollars of which will be direct. Murat Kurum, Minister for the Environment, Urbanisation and Climate Change, together with Mustafa Çiftçi, Minister of the Interior, conducted an inspection of the COP31 venue in Antalya, where the event is to be held from 9 to 20 November, and shared details regarding the economic and logistical aspects of the organisation with the public.
Kurum announced that over 1 million visitors are expected to attend the summit and that preparations have reached their final stage. It was reported that 85 heads of state have so far confirmed their attendance at the Leaders’ Summit, to be held on 11–12 November as part of the event, and that nearly 300 ministers will also be present in Antalya. Applications for 159 pavilions and 90 delegation offices have been approved for the summit, which is being held on a vast site covering a total of 1.1 million square metres within the EXPO grounds. Two plenary halls, 28 meeting rooms and a press centre capable of serving 4,000 media representatives have been set up on the site.
Turkish textile giant closes 7 factories, leaving 5,000 people unemployed
It has been announced that Turkish textile giant TYH Tekstil has closed 7 of its 13 factories, leaving 5,000 people unemployed. Speaking to the Ekonomim newspaper, Selçuk Mehmet Kaya Kaya, Chairman of the Board of Directors at TYH Tekstil, stated that they had reduced the number of factories from 13 to 6, saying, “We were producing with 6,900 people across 13 factories. We’ve reduced that to 1,900. In other words, we’ve had to part ways with 5,000 members of staff,” he said. Another textile firm, Akın Tekstil, is also planning to scale back its operations.Holding company exporting 1,250 products to 80 countries on the brink of bankruptcyRal Yatırım Holding (RALYH), a major player in the construction, energy and mining sectors, has filed for a composition with creditors due to difficulties in accessing finance and liquidity pressures. The company’s shares have fallen to the floor price on the Borsa İstanbul, with losses exceeding 94.4 per cent from their peak.Danone has sold three of its brands in TurkeyGlobal food giant Danone has sold three of its brands in Turkey. Danone has signed an agreement to transfer its bottled water and drinks operations in Turkey to the Antalya-based Ceylan Group. The major sale, under which the Sırma, Hayat and Akmina brands will be consolidated under the Ceysu umbrella, is expected to be finalised in the first half of 2027, following approval from the Competition Authority.Europe gripped by natural gas crisis; prices surge sharplyNatural gas prices in Europe have risen to their highest levels in recent years due to the war in Western Asia and concerns over supply security. Prices are now more than double the levels seen before the war in Iran began. As prices rose to a four-year high, they surpassed the 90-euro mark for the first time since the 2022 energy crisis. Dutch TTF futures contracts, recognised as Europe’s benchmark natural gas price, rose to 90.24 euros per megawatt-hour on 22 October, breaching the 90-euro mark for the first time since the 2022 energy crisis.Elon Musk wants to merge Tesla and SpaceXIt has been reported that Elon Musk is considering merging Tesla and SpaceX into a company valued at 3.5 trillion dollars, with the aim of finalising the deal before the end of Trump’s term in office. The world’s richest man has confirmed that he is exploring a potential merger between Tesla and SpaceX. The combined value of the two companies is approximately 3.5 trillion dollars (3.1 trillion euros), which could make the deal the largest merger in history.This move could be the final link in a series of deals connecting Elon Musk’s companies. A potential merger would mark a new chapter in a process that began a decade ago, when Musk started linking his companies together.Meta’s profit tripledMeta’s revenue rose by 26 per cent in the third quarter of the year to $64.6 billion, whilst its net profit surged by 264 per cent to $9.9 billion. The company exceeded market expectations and forecast revenue of $73–76 billion for the fourth quarter.
In its statement on the financial results, the company noted that an agreement had been reached in August with 52 state attorneys-general to resolve lawsuits concerning young people’s mental health and social media, with the settlement envisaging payments totalling approximately $18.59 billion.
Mark Zuckerberg, Meta’s founder and Chief Executive, said: “This quarter, we reached significant milestones towards our goal of delivering a personal super-intelligence for everyone, including the launch of our first advanced models, Muse and Muse Wonder. Our investments are paying off; our core business is very strong, and we are seeing significant acceleration across the board.”
The top three car-producing countries: China, the US and Japan; Turkey ranks 13th
The world’s top three car-producing countries are China, the US and Japan, whilst Turkey ranked 13th with 1,419,464 vehicles. According to 2025 data compiled by the International Organisation of Motor Vehicle Manufacturers (OICA), Turkey outperformed the UK, Indonesia and Iran.
China took the top spot in global production. In 2025, 34,530,738 motor vehicles were produced in the country. Production in the US, which came second, stood at 10,243,844 vehicles. Consequently, China’s annual vehicle production exceeded that of the US by a factor of three. The production gap between the two countries reached 24,286,894 vehicles. Japan came third with 8,410,232 vehicles, whilst India came fourth with 6,490,810 vehicles.
Ryanair CEO: The biggest fare increase in European history is on the way
Ryanair CEO Michael O’Leary predicts that European airfares could rise by up to 20 per cent by 2027, as rising fuel costs, taxes and reduced capacity put pressure on airlines. In a statement to Euronews, CEO Michael O’Leary said that airfares would rise significantly by 2027 due to rising fuel costs. He also criticised environmental taxes in Europe, arguing that they are driving up airlines’ costs.
The head of Europe’s largest low-cost airline expects airfares across Europe to rise by up to 20 per cent by 2027, as the war in Iran continues to drive up oil prices and airlines are affected by more expensive jet fuel.
According to data from the International Air Transport Association (IATA), jet fuel prices in Europe and the CIS averaged $207.61 per barrel in the week ending 16 October; this represents an increase of almost 128 per cent compared with the same period last year.
Barclays to cut 5,000 jobs as it shifts focus to artificial intelligence
The British bank Barclays has announced that it will make 5,000 redundancies – equivalent to approximately 5 per cent of its global workforce – by the end of 2026 as part of efforts to streamline its operations through the adoption of artificial intelligence and other technologies. The bank’s management stated that it would make a total of approximately 5,000 redundancies, including the reduction of around 1,000 staff already carried out in the first half of the year. Barclays stated that it is pursuing ‘increased efficiency through AI-driven organisational simplification and technological transformation’. According to the bank, as artificial intelligence makes staff more efficient, approximately 60 per cent of the redundancies will affect support functions, including software developers.
The world’s largest sovereign wealth fund lost $30 billion in the third quarter
The Norwegian Government Pension Fund closed the third quarter with a loss of $30 billion (€26.4 billion) as falling bond prices negatively impacted its overall performance. Norway’s sovereign wealth fund, the world’s largest state-owned sovereign wealth fund with assets of approximately 2.1 trillion euros, came under pressure from rising interest rates and announced an investment loss of 278 billion kroner (26.4 billion euros) on Thursday.
Norges Bank Investment Management (NBIM), which manages the fund, recorded a negative return of 3.5 per cent on its fixed-income investments, which account for just over a quarter of its portfolio. Around 70 per cent of these investments are in government bonds.
The third quarter of the year saw a period of global bond sell-offs, with government bond yields rising to levels not seen since the financial crisis, as concerns over rising public debt in the US and the EU intensified.
Volkswagen to freeze pay rises for employees for four years
A striking allegation has emerged regarding Germany’s giant car manufacturer, Volkswagen. Germany’s largest trade union, IG Metall, has revealed that the German automotive manufacturer, the Volkswagen (VW) Group, aims to freeze pay rises for its approximately 660,000 employees worldwide until 2030.
