TRY: Policy remains strict as CBRT pauses – Societe Generale

Societe Generale's Outlook on CBRT Policy

According to Societe Generale, the Central Bank of the Republic of Turkey (CBRT) is expected to leave its one-week repo rate steady at 37.0%, while maintaining a firm, hawkish approach. The bank highlights that the effective funding rate has already climbed to 40% due to reliance on the overnight lending facility. Additionally, significant foreign exchange reserves have been utilized and liquidity has been withdrawn to bolster the Lira and sustain tight financial conditions.

CBRT Likely to Maintain Current Rates

In emerging markets, forecasts suggest the CBRT will keep its one-week repo rate unchanged at 37.0% and issue a hawkish policy statement.

With the central bank halting the weekly repo facility and shifting all funding to the overnight lending window, the effective funding rate has surged by 300 basis points, reaching 40%.

Short selling remains prohibited, and the central bank has deployed nearly $12 billion in foreign exchange reserves since the onset of the Middle East conflict to prevent the Lira from weakening past 44.00.

Furthermore, the CBRT has withdrawn approximately $27 billion (TRY 1.2 trillion) in surplus liquidity to ensure continued monetary tightness.

The prevailing view is that interest rates will likely remain unchanged at least until June. The CBRT may also revise its end-2026 inflation target range upward, possibly to 20%-24%, compared to the previous 15%-21% projection.

(This report was produced with assistance from an AI tool and subsequently reviewed by an editor.)