ING’s Frantisek Taborsky anticipates that the Central Bank of the Republic of Türkiye (CBRT) will keep its policy rate unchanged at 37.00%, citing ongoing geopolitical tensions, oil prices above $90 per barrel, and recent tariff adjustments that limit the central bank’s ability to absorb higher energy costs [1]. The CBRT is expected to maintain cautious liquidity conditions and provide hawkish guidance, emphasizing a meeting-by-meeting approach rather than signaling the start of a rate-cutting cycle [1].
While markets see some possibility of the CBRT restarting one-week repo auctions at 37%, ING expects funding to remain at the upper end of the corridor for an extended period [1]. The rates market has only seen minor repricing despite the re-escalation of the US-Iran conflict, with current pricing reflecting a reduction in the effective rate to 38.50% today and aligning with the key rate from October this year [1].
Looking ahead, ING forecasts that the CBRT will resume rate cuts in the fourth quarter, potentially lowering rates to 35.00% by year-end [1]. On the foreign exchange front, the CBRT has been accumulating reserves in recent weeks and has returned long positions in the Turkish Lira (TRY) market to previous highs [1]. Despite a thinning carry, the TRY remains an attractive currency, a view that appears to be shared by the market [1].
CONCLUSION
The CBRT is expected to maintain its policy rate at 37.00% in the near term, with a cautious stance driven by geopolitical risks and higher energy costs. Market participants and ING analysts see the Turkish Lira as retaining its carry appeal, with potential for rate cuts later in the year if conditions allow.