For most of the past decade, Turkish macro was defined by one decision: whether monetary policy would be allowed to operate orthodox. Each cycle in which orthodoxy was attempted was followed by a cycle in which it was reversed. The current cycle, beginning in mid-2023 under Mehmet Şimşek as finance minister and a sequence of orthodox central bank governors, has now persisted long enough that markets have started to treat it as durable. Monthly inflation has broken structurally lower, the lira's real exchange rate is no longer collapsing, and dollar deposit conversion is reversing.
Key takeaways
- Monthly CPI has fallen below 2% on a sustained basis.
- The policy rate cycle is now genuinely disinflationary, not crisis-driven.
- Lira-denominated savings are rebuilding for the first time in years.
- Foreign portfolio flows into local-currency assets have resumed.
What changed institutionally
The political cover for orthodox policy has held longer than skeptics expected. The presidential reluctance to override technical decisions, the maintained appointment continuity at the central bank, and a Treasury team focused on debt management quality have together produced an environment in which expectations could anchor.
- Policy continuity. Şimşek has stayed; CBRT leadership has stayed orthodox.
- FX-protected deposit unwind. The KKM program has been wound down without disruption.
- Reserves. Net reserves have moved from deeply negative to materially positive.
What it changes for investors
Turkey's local-currency curve is finally tradeable for foreign portfolio accounts. Equities — long anchored by domestic households — are seeing foreign re-engagement. Corporate eurobonds are spread-tightening.
What could derail it
A political reversal of orthodoxy, which has happened before.
Where the curve sits
Front-end policy rates remain high but are now genuinely above inflation.
Macro inflection
| Indicator | 2023 | Mid-2026 |
|---|---|---|
| Annual CPI | ~65% | ~22% |
| Policy rate | ~25% | ~32% |
| Net FX reserves | negative | +$60bn |
Turkey's orthodox turn has lasted long enough that the market is treating it as the new equilibrium, not a temporary phase.
Frequently asked questions
Is the lira finally stable?
Real-effective stable; nominal still drifting, in line with disinflation.
Could orthodoxy be reversed?
Politically possible, but the cost has visibly fallen.
Are local bonds investable?
For the first time in years, yes.
The bottom line
Turkey's macro story has become an orthodox-stabilization story. That alone is worth a rerating.
