The Central Bank of the Republic of Türkiye has completed its liquidity normalization process through weekly repo auctions, effectively aligning its funding costs with the current 37% policy rate, according to ING economist Muhammet Mercan. This technical adjustment sets the stage for potential monetary policy shifts in the coming months.
ING expects the CBRT to maintain rates unchanged in the near term before implementing two rate cuts during the fourth quarter of this year. The liquidity normalization removes a key technical obstacle that had previously kept effective funding costs elevated above the official policy rate.
Traders and brokers should monitor Turkish lira positioning as the anticipated easing cycle approaches. The shift could impact carry trade dynamics and Turkish asset valuations, particularly if inflation trends support the central bank’s dovish pivot. Currency pairs involving the lira may see increased volatility as markets price in the expected rate path.
FXnCO Insight
Position ahead of Q4 by monitoring Turkish inflation data closely, as any upside surprises could delay expected rate cuts and trigger sharp lira volatility.
Source: FXStreet