MNI CBRT WATCH: Hold Expected On Oil, Geopolitical Uncertainty

The Central Bank of Turkey is expected to interrupt its easing cycle and hold the one-week repo rate at 37% when it meets on Thursday, with heightened uncertainty and higher oil prices likely ruling out a second cut this year. (See MNI EM CBRT WATCH: Turkey Central Bank Cuts 100 Basis Points)

The CBRT suspended one-week repo auctions “for a period of time” on March 1, shortly after the U.S. and Israel attacked Iran, effectively tightening financial conditions by 300 basis points. (See MNI EM INTERVIEW: Chances Of CBRT Rate Hold Growing - Demiralp)

Responding to the market instability, and in particular volatile energy prices, Finance Minister Mehmet Simsek called earlier this week for Turkey’s “citizens, investors and companies to assess this process rationally," noting too that "past experience shows that shocks of this kind are not permanent.”

While a rate cut is unlikely, so too is a hike. Policymakers are likely to default to their standard position, with the pace and scale of easing adjusted “prudently on a meeting-by-meeting basis with a focus on the inflation outlook.”

Governor Fatih Karahan will also be keen to emphasise that the monetary stance could be tightened “if the inflation outlook deviates significantly from interim targets,” though the precise value of these - 16% in 2026, versus a pre-war projection of 15–21%, and with inflation at 31.53% in February - is open to question.