Recent developments in the Middle East have prompted significant shifts in monetary policy expectations for both the Bank of England (BoE) and the Central Bank of the Republic of Türkiye (CBRT), according to analyses from ING and Standard Chartered [1][2]. ING analysts Benjamin Schroeder and Michiel Tukker report that markets have drastically reduced their expectations for BoE rate cuts, with the probability of a March cut falling from 80% to 20%. Additionally, while two cuts were fully priced for year-end, now only a slim chance of a second cut remains, reflecting heightened inflation risks stemming from Middle East tensions [1]. ING notes that the BoE appears particularly sensitive to inflationary impacts from the region, especially regarding energy supply disruptions [1].
Similarly, Standard Chartered economist Talha Nadeem highlights that the Middle East conflict has increased risks to Türkiye’s inflation and external outlook, leading to a more cautious stance from the CBRT [2]. The CBRT is now expected to keep its policy rate unchanged at 37% in March, a shift from the previously projected 100 basis point cut, while maintaining a year-end forecast of 30% [2]. In response to the conflict, the CBRT announced on 1 March 2026 the suspension of its one-week repo auctions, opting to use the 40% overnight lending rate in funding operations, which acts as a 'stealth' hike of 300 basis points versus the policy rate. The bank also initiated TRY-settled FX forward selling transactions to support the FX market, with the duration of these measures unspecified [2].
Headline CPI inflation in Türkiye increased to 31.53% year-on-year in February from 30.65% in January, and core inflation has remained around 33% over the past 12 months, indicating persistent disinflation headwinds even before the conflict began [2]. Standard Chartered notes that the CBRT’s proactive measures have supported the TRY so far and set the tone for the upcoming 12 March Monetary Policy Committee meeting, where a cautious approach is expected [2].
Both sources emphasize that central banks are reacting differently to the inflationary risks posed by Middle East turmoil, with the BoE showing heightened sensitivity to energy supply disruptions and the CBRT taking immediate action to stabilize the currency and address inflation concerns [1][2].
CONCLUSION
Heightened geopolitical risks from the Middle East have led to a sharp reduction in rate cut expectations for the Bank of England and prompted the Central Bank of the Republic of Türkiye to adopt a more cautious stance, including 'stealth' tightening measures. These developments signal increased inflationary pressures and uncertainty, resulting in high market impact and a negative sentiment for rate-sensitive assets.