Foreword

Fatih Karahan, Ph.D.
Governor

Price stability is a prerequisite for achieving sustainable growth and increased social welfare. The Central Bank of the Republic of Türkiye’s (CBRT) primary objective is to achieve and maintain price stability, and we carried out our actions in line with this objective in 2025. In this framework, the CBRT made monetary policy decisions based on predictability and resoluteness to ensure the continuation of the disinflation process. Monetary policy decisions were also supported by macroprudential measures aimed at strengthening the monetary transmission mechanism and financial stability.

In 2025, global uncertainty exceeded historical averages, and protectionist trends in foreign trade increased significantly. Nevertheless, the unfavorable impacts of elevated uncertainty on global growth remained limited compared to preliminary expectations. Meanwhile, economic activity across the global economy remained weak throughout the year.

The weak outlook for global demand and supply-side developments continued to put downward pressure on crude oil prices, while energy and commodity prices remained low. Additionally, a significant success was achieved in the global disinflation process and many central banks continued to cut policy rates throughout the year. In 2025, factors such as the current level of interest rates, inflationary risks stemming from tariffs, and the growth-employment outlook played a major role in central banks’ decisions.

In our country, economic activity remained moderate on an annual basis in 2025, with the growth rate standing at 3.6%. On the production side, while the services sector was the main driver of growth throughout the year, the industry and construction sectors also made positive contributions to growth. Agricultural value added declined due to a drop in crop production caused by agricultural frost and drought.

The disinflation process that started in June 2024 continued into 2025. The Consumer Price Index (CPI) fell by a total of 13.5 percentage points year-on-year, ending the year at 30.9%—remaining at the lower end of the forecast range presented in the last Inflation Report of 2025. Annual inflation of the B and C core inflation indicators decreased by 12.3% and 14.3% year-on-year, and stood at 31.7% and 31.1% at the end of 2025, respectively. Although inflation expectations and the pricing behavior displayed signs of improvement in 2025, they remained high, thereby continuing to pose a risk to the disinflation process.

The CBRT reduced the policy rate by a total of 500 basis points in January and March, bringing it down to 42.5%. To contain the risks that developments in financial markets could pose to the inflation outlook, at its interim meeting on March 20, 2025, the Monetary Policy Committee (MPC) decided to raise the overnight lending rate to 46%, keeping the policy rate and the overnight borrowing rate unchanged. On the same date, it was also decided to suspend one-week repo auctions. In April, the CBRT raised the policy rate to 46%, highlighting the impact of financial market developments on the underlying trend of inflation, and announced that one-week repo auctions that were formerly suspended would be resumed. After keeping the policy rate unchanged in June, the CBRT cut the policy rate by a total of 800 basis points in the subsequent meetings and had reduced the rate to 38% by December.

With the aim of enhancing the functionality of market mechanism, strengthening macrofinancial stability, and supporting the monetary transmission mechanism, the CBRT continued to implement macroprudential policy measures in 2025. The most significant step taken in this context was the termination of new openings and renewals of FX-Protected Deposit (KKM) accounts, and consequently, the removal of all targets related to KKM renewals and the transition to the Turkish lira. Measures aimed at increasing the share of Turkish lira deposits within total deposits and gradually reducing and phasing out KKM accounts supported the monetary policy stance in 2025.

In 2025, international reserves maintained an upward trend, with both gross and net reserves (excluding swaps) showing significant improvement. Accordingly, the strategy of accumulating international reserves will continue in 2026 as long as market conditions permit.

The CBRT will set the policy rate in 2026 at a level that ensures the tightness required by the disinflation process. The tight monetary policy stance, which will be maintained until price stability is achieved, will reinforce the disinflation process in 2026 through the channels of demand, exchange rates, and expectations. Should a significant and persistent deterioration in inflation be anticipated, the monetary policy stance will be tightened.

The CBRT will do whatever it takes in 2026 to ensure the continuation of disinflation and contribute to sustainable growth and increased social welfare; and we will continue our efforts with determination and dedication to reduce inflation in line with the intermediate targets we have set.