The interest rate-inflation relationship under an inflation targeting regime: The case of Turkey

► We examine the relationship between interest rates and the expected inflation under the inflation-targeting regime. ► We found that monetary policy rates depend on inflationary expectations; long-term interest is affected by monetary policy. ► This evidence implies that monetary policy has actually influenced the real long-term interest rates. ► The inflation targeting pursued by the Central Bank of Turkey is reliable. Thus, realized inflation has remained close to its targeted level.