Slowdown Signals in the Turkish Economy and Expected Steps by the CBRT

Data released ahead of the Monetary Policy Committee meeting to be held on September 10 reveals that growth and the labor market in the Turkish economy are slowing down, whereas inflation has not yet declined at the desired pace.

Growth Momentum Slowed in the Second Quarter

The Turkish economy recorded an annual growth rate of 2.3 percent in the second quarter of 2026. The decline from the 2.6 percent rate in the first quarter indicated that the momentum in economic activity has eased to moderate levels.

Sectoral Developments and Domestic Demand Status

While the agriculture sector grew by 13.3 percent and information and communication activities by 8.6 percent, the construction sector contracted by 1.9 percent. A 3.5 percent annual increase in household consumption indicated that the rebalancing in domestic demand is not yet complete.

Increasing Unemployment Rate in the Labor Market

The seasonally adjusted unemployment rate rose from 7.6 percent in June to 8.1 percent in July. In July, the number of employed persons decreased by 388 thousand to 32 million 362 thousand.

Inflation Outlook in August

Consumer prices increased by 1.84 percent monthly in August, while annual inflation declined to 31.51 percent. Food prices rose by 0.22 percent monthly, and the transportation group increased by 4.82 percent.

Strong Stance in Central Bank Reserves

As of the week of August 28, gross reserves stood at 188.2 billion dollars, net reserves at 66.6 billion dollars, and net reserves excluding swaps at 55.9 billion dollars. This reserve buffer provides the CBRT with room to maneuver.

Foreign TL Positions and Potential Risks

The position size of foreign investors, tracked through TRY derivative transactions, fell to 63.2 billion dollars. An interest rate cut faster than expected could lead to the unwinding of carry trade positions and an increase in foreign exchange demand.