Turkey may adjust monetary policy to ease pressure on real sector

Reports suggest that Turkey's economic management, led by Treasury and Finance Minister Mehmet Şimşek, may implement a 'calibration' of its tight monetary policy to provide relief to the real sector.

Proposed adjustments include lowering the funding rate from 40% toward the Central Bank's 37% policy rate, which could reduce market interest rates even without changing the headline rate. Additionally, there are discussions regarding easing the 0.5% monthly limit on foreign currency loans and relaxing growth restrictions that hinder access to TL operating loans for small and medium-sized enterprises (SMEs).

Regarding currency policy, there are claims that the government may shift away from a 'strong TL' stance, allowing the exchange rate to increase in line with inflation. Some economists have characterized these potential shifts as the ‘first step of an election economy,’ while others noted that the current exchange rate regime has exceeded its optimal duration.