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Economy June 25, 2026 10:45 AM

Turkey’s Central Bank to Keep Policy Rates Elevated Until July Meeting

Governor signals no return to weekly repo funding before July 23 as bank awaits fresh inflation readings

By Ajmal Hussain
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Officials say Turkey's central bank will hold higher borrowing costs through its next policy meeting on July 23 and will not resume weekly repo funding before that date, with policymakers opting to assess incoming inflation data first. The bank kept its one-week repo rate at 37% this month and has been using a 40% overnight rate since stopping funding at the lower level after February 28.

Turkey’s Central Bank to Keep Policy Rates Elevated Until July Meeting
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Key Points

  • Turkey's central bank will keep higher borrowing costs in place until the July 23 policy meeting - impacts banking sector liquidity and short-term money markets.
  • Governor Fatih Karahan said the bank will not resume weekly repo funding before that date, citing the need to review fresh inflation data - relevant for bond markets and corporate borrowing costs.
  • The Monetary Policy Committee left the one-week repo rate at 37% this month; the bank stopped funding at that rate after February 28 and has used a 40% overnight rate, tightening liquidity since the US- and Israeli-led war in Iran - affects financial market functioning and funding conditions.

Treasury and monetary authorities in Turkey will maintain elevated borrowing costs until the central bank's next policy session on July 23, according to people familiar with the matter cited by Bloomberg News. Governor Fatih Karahan told investors in London on Wednesday that the bank does not plan to restore weekly repo funding before that meeting.

Those who attended the governor's briefing said Karahan told investors that restarting weekly repo operations ahead of the July gathering would be premature because the bank wants to see fresh inflation data first. The attendees requested anonymity when relaying the comments. The central bank did not provide an official comment on the reports.

Earlier this month the Monetary Policy Committee left the benchmark one-week repo rate unchanged at 37%. The central bank had ceased funding at that rate after February 28 and switched to a costlier overnight lending rate of 40%. That operational change tightened domestic liquidity conditions following the US- and Israeli-led war in Iran.

Karahan's statement is expected to temper market hopes that policymakers were ready to restart an easing cycle in the near term. Still, some market participants continue to expect that the central bank could lower overnight lending rates as soon as next month.

Context and operational stance

The bank's current posture rests on maintaining a high headline policy stance while pausing weekly repo funding until after the July 23 meeting. Officials have cited the need to evaluate incoming inflation readings before adjusting the operational framework or signaling a return to weekly repos.

Market implications

By indicating no immediate resumption of weekly repo funding, the central bank dampens short-term expectations for an imminent easing of rates. The use of the 40% overnight facility in place of one-week repo funding has already had a tightening effect on liquidity conditions.

Note on sourcing

The reporting in this article is based on comments attributed to people familiar with the matter and to attendees at a London investor meeting who spoke on condition of anonymity. The central bank declined to comment when approached regarding the reported remarks.

Risks

  • Uncertainty around incoming inflation data - the central bank is delaying operational changes until it reviews these figures, which could prolong elevated borrowing costs and sustain tighter liquidity for banks and markets.
  • Lack of official comment from the central bank increases market ambiguity - reliance on anonymous accounts may keep expectations volatile across FX, bond, and money markets.
  • Geo-political driven liquidity tightening - the shift to a 40% overnight rate following the US- and Israeli-led war in Iran has already tightened conditions and could continue to influence funding availability and borrowing costs.

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