Turkey’s Overnight Borrowing Rate: October 2025 Update and Macro Outlook
The latest data from the Sigmanomics database reveals Turkey’s Overnight Borrowing Rate declined to 38.00% in October 2025, down from 39.00% in September. This marks a continued easing from the peak levels observed in 2024, reflecting shifts in monetary policy amid evolving macroeconomic conditions. This report analyzes the recent rate movement, compares it with historical trends, and assesses implications for Turkey’s economy and financial markets.
Table of Contents
Turkey’s Overnight Borrowing Rate eased to 38.00% in October 2025, down 1 percentage point MoM and sharply lower than the 47% plateau maintained throughout most of 2024. This decline signals a gradual monetary policy normalization amid easing inflation pressures and a more stable TRY currency environment. The rate remains historically elevated, reflecting persistent inflation and external vulnerabilities.
Drivers this month
- Inflation deceleration: CPI inflation slowed to 38.50% YoY in September from 42.30% in July.
- TRY stabilization: The Turkish lira appreciated 2.30% against the USD in October.
- Moderate credit growth: Bank lending expanded 6.50% YoY, supporting economic activity.
Policy pulse
The 38.00% overnight rate remains well above the central bank’s inflation target of 5%, indicating a cautious stance. The 1-point cut aligns with the central bank’s gradual approach to easing financial conditions without risking inflation resurgence.
Market lens
Immediate reaction: USD/TRY fell 1.80% within the first hour post-release, signaling market approval of the rate cut. Short-term government bond yields declined by 15 basis points, while the 2-year breakeven inflation rate edged down to 12.40%, reflecting improved inflation expectations.
Turkey’s macroeconomic backdrop remains complex. Inflation, though easing, is still elevated. GDP growth moderated to 3.10% YoY in Q3 2025, down from 4.20% in Q2. The fiscal deficit narrowed to 3.80% of GDP in the first nine months, supported by improved tax revenues and restrained spending.
Inflation and growth
- September CPI inflation: 38.50% YoY, down from 42.30% in July 2025.
- Q3 GDP growth: 3.10% YoY, slower than 4.20% in Q2 but above regional peers.
- Unemployment rate steady at 11.70% in September.
Monetary policy & financial conditions
The central bank’s policy rate remains the highest among emerging markets, reflecting persistent inflation risks and TRY depreciation pressures. The overnight borrowing rate’s decline from 47% in late 2024 to 38% now signals a cautious pivot toward easing. Credit growth remains moderate, with bank lending expanding 6.50% YoY, supporting consumption and investment.
Fiscal policy & government budget
Fiscal discipline improved, with the primary deficit narrowing to 1.20% of GDP in Q3 2025. Government debt stood at 39% of GDP, down from 42% a year ago, aided by stronger tax collection and restrained capital spending. However, external debt servicing costs remain elevated due to TRY volatility.
Historically, the rate peaked at 47% for five consecutive months in 2024, driven by inflation surges and TRY depreciation. The current 38% level is the lowest since early 2024, signaling a shift in policy stance. The rate remains elevated compared to pre-2024 levels, underscoring ongoing inflationary pressures.
This chart highlights a clear trend of monetary easing after a prolonged tightening cycle. The rate’s decline is consistent with easing inflation and TRY appreciation, suggesting a more stable macroeconomic environment ahead.
Market lens
Immediate reaction: BIST 100 index rose 1.20% post-release, reflecting investor optimism on easing financial conditions. The TRY/USD spot rate strengthened, and short-term bond yields declined, indicating improved market sentiment.
Looking ahead, Turkey’s Overnight Borrowing Rate trajectory will hinge on inflation dynamics, TRY stability, and external shocks. The central bank’s cautious easing suggests a base case of gradual rate cuts over the next 6-12 months.
Bullish scenario (30% probability)
- Inflation falls below 25% by mid-2026.
- TRY stabilizes with limited volatility.
- Monetary policy eases aggressively, pushing rates below 30% by Q3 2026.
Base scenario (50% probability)
- Inflation moderates to 30-35% range.
- TRY remains stable but vulnerable to external shocks.
- Gradual rate cuts continue, reaching 33-35% by end-2026.
Bearish scenario (20% probability)
- Inflation rebounds above 40% due to fiscal slippage or external shocks.
- TRY depreciates sharply amid geopolitical tensions.
- Monetary tightening resumes, pushing rates back above 40%.
Risks and opportunities
Upside risks include faster inflation decline and improved fiscal discipline. Downside risks stem from geopolitical tensions, commodity price shocks, and global financial volatility. The central bank’s ability to balance growth and inflation will be critical.
Turkey’s Overnight Borrowing Rate decline to 38.00% marks a significant step in monetary policy normalization. While still elevated, the easing reflects improving inflation trends and TRY stability. The path forward remains sensitive to external shocks and fiscal policy execution. Investors and policymakers should monitor inflation, currency movements, and geopolitical developments closely.
Overall, the rate’s trajectory suggests cautious optimism but underscores the challenges Turkey faces in taming inflation while supporting growth.
Key Markets Likely to React to Overnight Borrowing Rate
Turkey’s Overnight Borrowing Rate significantly influences domestic financial markets and the TRY currency. Key assets that historically track this indicator include the Turkish lira currency pairs, local equity indices, and government bonds. These markets react swiftly to rate changes, reflecting shifts in monetary policy and economic outlook.
- USDTRY: The USD/TRY pair is highly sensitive to rate changes, with rate cuts often leading to TRY appreciation.
- BIST100: Turkey’s main equity index tends to rally on rate easing due to improved liquidity and investor sentiment.
- EURTRY: The euro to lira exchange rate also reacts strongly to monetary policy shifts.
- BTCUSD: Bitcoin’s price often moves inversely to local currency stress, serving as a risk hedge.
- AKBNK.IS: Akbank shares are sensitive to interest rate changes due to their banking sector exposure.
Insight: Overnight Borrowing Rate vs. USDTRY Since 2020
Since 2020, the Overnight Borrowing Rate and USD/TRY exchange rate have shown a strong positive correlation. Periods of rate hikes correspond with TRY depreciation, as seen in 2024 when the rate peaked at 47% alongside USD/TRY surging above 28. The recent rate easing to 38% aligns with a 2.30% TRY appreciation in October 2025, underscoring the rate’s role in TRY valuation and inflation control.
FAQ
- What is the Overnight Borrowing Rate in Turkey?
- The Overnight Borrowing Rate is the interest rate at which banks borrow funds overnight from the central bank, reflecting monetary policy stance and liquidity conditions.
- How does the Overnight Borrowing Rate affect inflation?
- Higher rates typically tighten liquidity, reducing inflationary pressures, while lower rates can stimulate demand and potentially increase inflation.
- Why is Turkey’s Overnight Borrowing Rate so high compared to other countries?
- Turkey’s elevated rate reflects persistent inflation, TRY depreciation risks, and the central bank’s efforts to anchor inflation expectations amid external vulnerabilities.
Takeaway: Turkey’s Overnight Borrowing Rate easing to 38.00% signals cautious monetary normalization amid easing inflation and TRY stabilization, but risks remain elevated.
USDTRY - Key currency pair reflecting TRY volatility and monetary policy impact.
BIST100 - Turkey’s main equity index sensitive to interest rate changes.
EURTRY - Euro to Turkish lira exchange rate, reacts to monetary shifts.
BTCUSD - Bitcoin price often inversely correlated with TRY stress.
AKBNK.IS - Akbank shares, sensitive to Turkish interest rate movements.









The Overnight Borrowing Rate at 38.00% in October 2025 is down 1 percentage point from September’s 39.00% and significantly below the 12-month average of 44.50%. This marks a clear downward trend from the persistent 47% level held throughout 2024.
This decline reflects the central bank’s gradual easing amid moderating inflation and improved TRY stability. The rate’s trajectory suggests a cautious but steady normalization of monetary policy.