MNI CBRT Preview - June 2025: Room to Hold Until July

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Executive summary:

• The CBRT is expected to keep its one-week repo rate unchanged at 46.00% this month following a 350bp hike in April, but risks of a rate cut are noted by some analysts given the recent slowdown in monthly inflation.
• However, upside price pressure stemming from FX weakness post the arrest of the Istanbul mayor Ekram Imamoglu in March ultimately warrants further caution, while increased funding through the key policy window has already led to a reduction in the weighted-average funding rate.
• All of the analyst views we have surveyed in this document expect the CBRT to stand pat on rates this month, with the rate-cutting cycle expected to resume in July. Some forecast 250bp rate cuts at each meeting from next month onwards, which would take the one-week repo rate to the mid-30s by year-end. 

While the central bank’s key one-week repo rate stands at 46.00% following a 350bp hike in April, the Bank began to lean more heavily on its overnight lending facility following the March 19 turmoil – where the associated rate is 49.00% – effectively returning interest rates to levels seen a year ago. The CBRT can therefore ease liquidity conditions to normalise the average funding cost around the key rate, and in doing so it can provide 300bps of effective easing without adjusting its main policy rate. 

The central bank has already expanded its funding through the key window to above TRY 200bln on June 11 from TRY 5bln the week prior, and this resulted in the weighted-average funding rate slipping to 48%. Bloomberg Economics note that if the central bank maintains this trend, it could drive the effective funding rate down to almost match the 46% policy rate by the June meeting. Ultimately, this ‘shadow easing’ will provide policymakers with room to stand pat on rates until the July 24 meeting.