Turkey's Central Bank faces high barrier to further rate hikes, analysts say

JPMorgan and Goldman Sachs analysed the Turkish Central Bank's (TCMB) June rate decision and concluded that a new interest‑rate increase is unlikely in the short term. Both firms noted that the “rate‑hike barrier” is now “significantly high” because internal demand remains weak and core inflation has slowed. They expect the policy (weekly repo) rate to stay unchanged through the end of the year and possibly until 2026, unless an exceptional dollarisation pressure emerges.

The analysts highlighted that the TCMB is pursuing “covert tightening” by shifting funding from the 37 % weekly repo to a costlier 40 % overnight borrowing facility, rather than raising the headline policy rate. They added that, as regional geopolitical risks recede, the bank may return to using the repo rate as its primary financing tool.