Türkiye's central bank said on March 20 that it suspended one-week repo auctions and hiked its overnight lending rate to 46%, in a move that economists say amounts to a tighter policy stance, Report informs via Reuters.
Traders and analysts said overnight market interest rates could be 350 to 400 basis points higher after the move, as the central bank will fund the market from rates higher than its current policy rate of 42.5%.
The overnight lending rate was raised by 200 basis points from 44% in an interim monetary policy committee meeting, as the central bank convened on Thursday to discuss recent developments that may pose risks to the inflation outlook.
"This regulation provides flexibility to increase overnight market interest rates, which have recently been 42%, to 46%. Instead of losing reserves, it is an important and correct step to show that your hands are not tied by making this decision," Economist Hakan Kara said in a post on X.
"After this decision, the expectation of a rate cut in April will probably disappear," Kara added.