ANALYSIS: Will the CBRT Maintain its “Hawkish” Shift in March After January’s Surprise?

ISTANBUL — The Central Bank of the Republic of Turkey (CBRT) kicked off 2026 with a move that caught most market participants off guard. By opting for a smaller-than-expected 100-basis-point (bps) cut—lowering the policy rate from 38% to 37%—the bank signaled a heightened level of caution. With major financial institutions previously pricing in a 150-bps reduction, the decision has sparked a debate: Is this a temporary defensive move against January’s inflation spike, or a strategic shift toward a more aggressive disinflation path?

Market Reaction and “Cautious” Optimism

The immediate response from the markets was mixed. While short-term government bonds and banking equities faced selling pressure following the smaller cut, insurance stocks and long-term bonds showed positive divergence.

İş Investment noted that despite being on the wrong side of the prediction, they view the CBRT’s prudence as a positive signal for the medium term. The key question for investors remains whether this “downshifting” in rate cuts is a short-term shield against seasonal food price hikes in January and February, or a long-term strategy to bridge the 420-bps gap between market inflation expectations (23.2%) and the CBRT’s upper target bound (19%).

The Road to the March Meeting

The CBRT’s press release offered few explicit clues, noting that while monthly headline inflation rose in January due to food prices, the underlying trend remained relatively stable. However, the bank did highlight that the “contribution of demand conditions to the disinflation process has decreased,” suggesting that the central bank is prepared to keep policy tighter for longer if domestic consumption does not cool sufficiently.

Leading analysts from Akbank Research and Gedik Investment have weighed in on what this means for the upcoming March Monetary Policy Committee (MPC) meeting:

• Akbank Research: Despite the January surprise, Akbank maintains its year-end inflation forecast of 25%, with the policy rate expected to settle at 31%. They anticipate the 100-bps pace to continue in March, but suggest the bank may “skip” a meeting later in the year or further reduce the size of cuts to 50 bps to ensure targets are met.

• Gedik Investment: They interpret the move as a pre-emptive strike to protect the credibility of the upcoming February 12 Inflation Report. By staying “hawkish,” the CBRT signals that its 16% intermediate target for late 2026 is non-negotiable. Gedik suggests that if January inflation settles around 4.0% and February at 2.0%, the bank may maintain a 100–150 bps pace. However, any overshoot (e.g., 4.5% in January) would bolster the case for a complete pause in March.

Revised Year-End Projections

Following the January decision, brokerage firms are updating their year-end policy rate terminal targets. The consensus suggests that rates will likely stay higher than previously modeled.

Implications for Credit and Deposits

A critical takeaway from the current outlook is the persistence of high deposit rates. Due to the CBRT’s targets for increasing the share of Lira-denominated deposits, deposit rates are expected to remain well above the policy rate.

Furthermore, Gedik Investment warns that due to credit growth limits and liquidity measures, the easing in the policy rate may not immediately translate to lower loan rates for the real sector. For businesses, this means the cost of financing will remain structurally high during the first half of 2026.

The Bottom Line: The CBRT has successfully sent a message of “determination” to the markets. While a 100-bps cut is still expected in March, the central bank has effectively put the market on notice: if inflation data remains stubborn, the “easing cycle” could be much slower and more painful than originally anticipated.