This has led to higher lending rates and lower lending limits for some banks, with some financial institutions reducing commercial loan limits to 100,000 lira ($3,100), Reuters reported on Thursday.
“Some banks have stopped lending. Some banks have even withdrawn loans already. This will create additional liquidity,” Arda Tunka, an economist at Istanbul-based Politiyor, told CNBC. There will be a tightening of the trade,” he said.
“If the central bank is willing to lower inflation, liquidity conditions should certainly be compressed, but the methodology is most important,” he said. “If your methodology is wrong, you can’t control market expectations.”
Indeed, Turkish bank stocks fell on Thursday’s news. Economic data platform Emerging Markets Watch said in a post on X that the central bank was taking “further tightening measures through reserve requirements.”
Analysts at London-based Capital Economics expressed a similar view.
“New quantitative and credit tightening tools were announced last month,” the company said in a research note. “Last week, the CBRT tightened restrictions on lira loan growth, which is likely to have a similar impact as a rate hike.”
Meanwhile, Turkey’s monthly reserves fell in January for the first time since May 2023, according to balance of payments data released this week.
Türkiye’s annual consumer price inflation rate rose to 67.07% in February. The strong numbers prompted Turkey’s central bank to signal last month that its painful eight-month rate hike cycle was over, raising concerns that it may have to return to tightening.
“Pressure is mounting on Turkey’s policymakers ahead of local elections on March 31 as capital inflows slow and foreign exchange reserves decline again,” Capital Economics wrote. “While we have doubts that the central bank will raise rates next week, we are increasingly confident that there will be at least one further rate hike in the second quarter.”
—CNBC’s Dan Murphy contributed to this report.
