The Central Bank of the Republic of Türkiye held its one-week repurchase rate at 37.0% on Thursday, keeping the overnight lending rate at 40.0% and the overnight borrowing rate at 35.5%, following a re-escalation of geopolitical tensions cited in the accompanying press release.
The decision marks the fifth consecutive month in which the bank has been funding the market primarily through its overnight lending rate rather than the one-week repo rate, according to the statement published on the central bank's website.
CORRIDOR REMAINS ASYMMETRIC
By maintaining an overnight lending rate of 40.0% alongside the 37.0% policy rate, the central bank preserves the asymmetric interest-rate corridor that has framed its liquidity management approach in recent months. Funding through the overnight lending rate has continued for a fifth consecutive month, the bank noted, effectively lifting the marginal cost of central bank funding above the headline policy rate for a sustained period.
The overnight borrowing rate was held at 35.5%, keeping the lower bound of the corridor 150 basis points below the one-week repo rate. Together, the three rates give the central bank flexibility to steer short-term money-market rates depending on the balance of inflation, exchange-rate and liquidity considerations at any given moment, without needing to move the headline policy rate itself.
Turkish lira deposit rates fell to 46.7% while commercial loan rates dropped to 48.9%, reflecting the pass-through of earlier policy calibration into the wider banking system. Those levels remain well above headline inflation but below the effective marginal funding cost embedded in the operational framework used by the central bank to steer market conditions.
GEOPOLITICS SHAPES STANCE
The re-escalation of geopolitical tensions was cited as a key factor in the committee's assessment. Türkiye is directly exposed to regional developments through trade routes, energy prices, refugee flows and financial market sentiment, all of which factor into the domestic inflation outlook and the balance of risks facing the central bank as it manages the disinflation process.
The bank left the language of its policy stance unchanged from the previous statement, signalling continuity in its overall approach to disinflation. The press release published on the central bank's website carried the standard framing that policy would be tightened further if a significant and persistent deterioration in the inflation outlook were foreseen, preserving the committee's option to act should the balance of risks worsen.
For Turkish banks, the combination of a 37.0% policy rate, a 40.0% overnight lending rate and lira deposit rates of 46.7% shapes the environment for asset repricing, funding costs and margin outcomes. Secondary market commentary noted the persistence of the funding-through-overnight-lending pattern as a distinguishing feature of the current operational stance and a marker of the committee's cautious posture.
The Monetary Policy Committee will meet again on its scheduled calendar. The decision confirmed for now that the combination of geopolitical risk, elevated but moderating deposit and loan rates and unchanged policy language justified holding the headline rate at 37.0% while continuing to fund the market at the higher overnight lending rate of 40.0%.
Investors and analysts have looked to the persistence of the asymmetric corridor as a signal of how the central bank intends to balance the twin objectives of anchoring inflation expectations and safeguarding financial stability. The unchanged stance in July suggests the committee sees no need to alter that balance at this point, even as external risks have re-intensified through the summer.