Overview

• The Monetary Policy Committee reduced the upper band of its rate corridor from 49% to 46%, narrowing the gap between policy and market rates
• Annual inflation has fallen from a peak near 75% last May to 35% in June, and economists in a Reuters poll project it will decline to around 30% by year-end
• A Reuters poll of 34 economists sees GDP growth slowing to 2.8% this year, well below the government’s 4.0% target, with a modest rebound to 3.3% expected in 2026
• Foreign holdings of lira-denominated bonds climbed to about 7% after recent tightening measures, up from roughly 5% following the March arrest of Istanbul’s mayor
• Recent detentions of opposition mayors in corruption investigations continue to weigh on investor sentiment and pose downside risks to policy credibility