Turkey: CBRT likely to hold before two Q4 rate cuts - ING

FXStreet Insights Team FXStreet

ING’s Muhammet Mercan notes the Central Bank of the Republic of Türkiye (CBRT) has normalised liquidity via weekly repo auctions, bringing effective funding costs down to the 37% policy rate. ING expects the CBRT to hold rates at the September meeting, then deliver two 100bp cuts to 35% in the fourth quarter, with further Gulf conflict escalation posing upside inflation risks and the policy rate seen at 35% by 2026.

Liquidity normalisation and planned cuts

"Towards the end of August, the Central Bank of Turkey took a step to normalise liquidity and started weekly repo auctions."

"Accordingly, the effective cost of funding and TLREF dropped directly to the level of the policy rate at 37% from 40%."

"The CBRT is likely to remain on hold in the September meeting this Thursday after this liquidity move."

"We see two 100bp cuts to 35% in the last quarter given the weaker-than-expected 2Q GDP data and further gradual cooling of inflation, though any further escalation in the Gulf conflict would add to upside risks."

"We see the policy rate at 35% by the end of 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

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