CBRT’s Repo Revival: The Route to 37% Funding Costs and Borsa Istanbul’s New Equation

The Central Bank of the Republic of Turkey (CBRT) has initiated a new phase of fine-tuning in monetary policy by returning to repo auctions after a six-month hiatus. While not codified as an outright interest rate cut, this strategic move marks a critical turning point in sterilizing excess liquidity and rationalizing funding costs.

Easing the Liquidity Corridor: Anticipating a Decline from 40% to 37%

Volkan Dükkancık, Strategy Director at Pusula Yatırım, projects that the central bank’s latest intervention will alleviate tight market conditions. The shift in the banking system's funding composition holds the potential to exert downward pressure on effective interest rates.

■The return of the CBRT to repo auctions signals a commitment to managing temporary liquidity squeezes in the financial sector.

■Although not an official policy rate cut, market funding costs are expected to gradually ease from %40 to the %37 band.

■This normalization step will lower funding costs for the banking system, prompting a rebalancing in loan and deposit rates.

Selective Rally in Borsa Istanbul: The Dawn of Stock-Specific Divergence

Easing funding costs coupled with the simplification of macroprudential measures serve as a fresh catalyst for equity markets. Volkan Dükkancık emphasizes that a medium-term upward trend is imminent for stock investors, though stock-specific analysis will overshadow broad index movements.

The CBRT's return to repo auctions is a technical adjustment aimed at overcoming bottlenecks in the monetary transmission mechanism. However, unless accompanied by structural reforms and fiscal discipline on the public finance side, monetary policy alone lowering the funding corridor to %37 cannot sustain a permanent disinflationary path. Rigidities in the labor market and delays in tax reforms risk prematurely exhausting the benefits of such easing steps. Without the backing of a tight fiscal stance, equity rally expectations will remain nothing more than speculative optimism.