Central Bank Resumes Weekly Repo Auctions Amid Rate Hike

Just one day after delivering a surprise 350 basis point rate hike, Türkiye’s Central Bank (CBRT) announced it will resume weekly repo auctions, ending a suspension that began on March 20. Analysts say the move signals an intent to avoid keeping market rates pinned at the upper bound of 49%, aiming instead for a more flexible average around the new policy rate of 46%.

In its April 17 statement, CBRT reaffirmed its commitment to price and financial stability, stating:

“Liquidity conditions will continue to be closely monitored, and liquidity management tools will be used effectively in line with monetary policy objectives.”

Functional Tightening: A New Phase in Monetary Strategy

The repo auctions are seen by economists as a mechanism for adjusting short-term market interest rates to fluctuate within the new corridor:

• Lower bound: 44.5%

• Upper bound: 49%

• Policy rate (weekly repo): 46%

By reintroducing repo operations, CBRT is preventing overnight rates from anchoring permanently at 49%, allowing them to adjust daily based on liquidity availability.

“This marks a shift to more flexible monetary tightening, where short-term rates will respond to market conditions rather than being held artificially high,” analysts say.

Background: Political Shock, Currency Volatility, and a $50B Reserve Drain

The decision comes amid political and financial unrest, particularly following the March 19 arrest of Istanbul Mayor Ekrem İmamoğlu, which triggered a sharp increase in dollar demand and investor anxiety. The central bank responded by selling over $50 billion in FX reserves, accumulated over two years, to stabilize the Turkish lira.

With markets still on edge, April’s rate hike and this repo move reflect the CBRT’s effort to balance inflationary pressures and currency volatility, while maintaining credibility.

What’s Next?

The CBRT’s latest steps show a commitment to dynamic liquidity management, with repo auctions now functioning as a tool to:

• Support transmission of monetary policy

• Avoid excessive tightening beyond necessary levels

• Guide market expectations without capping flexibility

These actions are not a policy reversal, but rather a calibration within a broader disinflation strategy. The bank emphasized that all monetary tools will continue to be used decisively and transparently, depending on evolving inflation and liquidity data.