The political developments over the weekend have dragged Turkey into a new wave of uncertainty. As volatility in economic indicators increases, the Central Bank and the Capital Markets Board (SPK) have taken notable steps. This week, we may witness intense political and economic communication traffic and, accordingly, high volatility.
⚖️ İmamoğlu Arrested, Early Election Call from Özel
Over the weekend, Istanbul Metropolitan Municipality Mayor Ekrem İmamoğlu was arrested as part of a corruption investigation targeting the municipality. The uncertainty that began with the annulment of his diploma and subsequent detention deepened with the weekend’s arrest order.
It was reported that nearly 15 million people voted in favor of İmamoğlu in the CHP's internal presidential candidacy vote, held on Sunday through “solidarity ballot boxes.” Although Özgür Özel called for early elections after the vote, the political landscape and its potential scenarios remain unclear.
Therefore, the key debate now is how these developments will reflect on the political scene and economic activity, following the major turbulence experienced in financial markets last week. It is also far too early to say that the financial market reaction has ended.
🏦 Central Bank Measures
As previously noted, the CBRT last week announced that it would begin Turkish lira-settled forward FX sales to curb potential exchange rate volatility and balance FX liquidity.
Then on Thursday, March 20, it raised the upper band of the interest rate corridor—its overnight lending rate—from 44.0% to 46.0%, and canceled weekly repo auctions which had provided funding at 42.5%.
On Friday, March 21, the CBRT announced it would begin issuing liquidity bills with maturities of up to 91 days, aiming to strengthen monetary transmission and support a tight monetary stance through effective sterilization tools. Although the CBRT sterilizes Turkish lira liquidity via FX sales, we should note that as of March 21, there was still 678.1 billion TRY of excess liquidity in the system. Issuance of liquidity bills will begin on Monday, March 24, 2025. The last time the CBRT issued liquidity bills was in 2007.
The CBRT also held an extraordinary meeting with bank CEOs yesterday. According to unofficial sources, several demands were made by bankers:
Keeping the buy-sell spread wide in FX and gold to curb demand
Raising interest rates to prevent outflows from TL funds and deposits
Encouraging depositors to move to alternative investment funds
Tight monitoring of credit issuance to prevent firms from using loans to buy FX and gold
Banning options and leveraged transactions in Treasury products
While it’s unclear how the CBRT will respond to these demands, if FX demand continues at last week’s intense pace, we could see the following:
The CBRT not returning to weekly repo auctions
Introducing limits on overnight lending at the upper band
Activating the late liquidity window (GLP) and raising its rate to increase the weighted average cost of funding
Sharply increasing the policy rate if other tools fail
Reducing withholding tax on TL deposits and money market funds
Lowering foreign currency reserve requirements
Raising TL reserve requirements and loosening interest payment terms tied to credit growth targets
Selling government bonds from its portfolio
Reopening the TL depo against FX market, last used in 2019
📉 SPK Measures
To counter the ongoing market turbulence, the Capital Markets Board (SPK) announced a set of measures on Sunday:
Short selling on BIST will be banned from March 24 to April 25, 2025
The margin maintenance ratio in leveraged transactions can be lowered to as low as 20%, from the usual 35%
Some restrictions on share buybacks by publicly listed companies were removed
💹 Market Pricing
Here's a quick summary of weekly asset price changes as of the March 21 close:
USD/TRY: 37.88 (+3.6%)
EUR/TRY: 41.06 (+3.4%)
2Y bond yield: 42.28% (+5.2 pp)
5Y bond yield: 36.36% (+4.0 pp)
10Y bond yield: 31.06% (+5.0 pp)
Overnight swap rates in London: 136%
BIST 100: 9044.6 (-19.5% in $ terms)
🏦 CBRT Funding and Sterilization Data (as of March 21)
Repo auctions (depo absorption): 662.4 billion TRY
Overnight quote-based funding: 15.7 billion TRY
Reverse swap transactions: 370.7 billion TRY
Open FX forward position (TRY-settled): 237 million USD
💵 Latest Monetary Aggregates
Although there are unofficial reports of a reserve loss of nearly $20 billion, official data for last week are not yet available. As of the latest confirmed data (March 14):
CBRT gross reserves: $171.1 billion (+$1.17 billion weekly)
Net reserves: $66.3 billion (+$1.39 billion weekly)
Net FX position: $57.9 billion
March 20 reserve drop: $8.8 billion
Foreign portfolio stock:
Equities and bonds: $52.5 billion (+$1.47 billion weekly)
Sovereign and private eurobonds: $67.099 billion (–$728 million weekly)
Off-balance sheet FX position of banks (excl. CBRT): $36.5 billion (+$1.7 billion weekly)
💳 Drop in Credit and Deposit Rates
3-month TRY deposits: 49.91% (prior week: 51.45%)
Personal loans (excl. overdrafts and credit cards): 62.73% (prior: 64.12%)
Commercial loans (excl. overdrafts and cards): 50.32% (prior: 50.36%)
🌍 This Week’s International Data Agenda
The most important data release for global markets this week will be the February U.S. core PCE inflation, which will be announced on Friday at 3:30 PM. Core and headline PCE inflation are both expected to remain steady at 0.3% in February. In January, headline inflation was 2.5%, and core inflation came in at 2.6% As a reminder, Fed members raised their end-2025 projections from 2.5% to 2.8% at the latest FOMC meeting. Therefore, an above-expectation result would not create a major surprise.
Other important data this week include the flash PMIs for March, which will be released on Monday. In Japan, the manufacturing PMI is expected to increase from 49.0 to 49.2, while there is no forecast for the services PMI, which came in at 53.7 in February. In Germany, the flash manufacturing PMI is expected to rise from 46.5 to 47.7; in the Eurozone, from 47.6 to 48.0; and in the UK, from 46.9 to 47.3. Despite the negative impact of Trump’s tariff decisions, manufacturing activity in Europe and Japan—while still in contraction territory—is showing signs of improvement. In contrast, the U.S. manufacturing PMI, which remains in expansion territory, is expected to decline from 52.7 to 51.9. For services PMIs, expectations are for the indices to remain above 50.0 and to show month-on-month increases in Europe, the UK, and the U.S. While seeing a rise in economic activity indices is positive, it is still too early to say these reflect the effects of tariff decisions. Therefore, even if we see fiscal expansion-driven increases in European indices in the coming months, a slowdown in the U.S. would not be surprising.
Another key data release this week will be the UK inflation figures, scheduled for Wednesday at 10:00 AM. In the UK, headline CPI is expected to fall from 3.0% to 2.9%, while core inflation is expected to decline from 3.7% to 3.6%. A result in line with expectations would likely revive expectations of further BoE rate cuts and could positively affect the GBP/USD exchange rate.
Also on Wednesday at 3:30 PM, February U.S. durable goods orders will be released—another major market-moving indicator. After a 3.1% monthly increase in January, orders are expected to decrease by 0.7% in February. For orders excluding transportation, the monthly change is expected to accelerate from 0.0% to 0.4%.
🇹🇷 This Week’s Domestic Data Agenda
Among the key domestic data releases this week are the March real sector confidence index and capacity utilization, both scheduled for Tuesday at 10:00 AM. There are no market expectations for these figures, and they are not expected to reflect the recent political tensions in the economy. In February, the index rose 0.2% from the previous month to reach 102.8, while capacity utilization increased from 74.8% to 74.9%. These figures will be important for providing early signals on first-quarter growth.
Another major release will be the February foreign trade balance, due Thursday at 10:00 AM. According to preliminary data from the Ministry of Trade, the foreign trade deficit rose from $6.8 billion in the same month last year to $8.1 billion this February. This increase was driven by a 1.5% year-on-year drop in exports to $20.8 billion and a 3.8% rise in imports to $28.9 billion. If the final results confirm the preliminary figures, the 12-month cumulative trade deficit will rise by $1.4 billion to $85 billion.
There are no market expectations for the January unemployment rate either. In December, the unemployment rate declined slightly from 8.5% to 8.4%, while the broad (underemployment) rate rose from 28.0% to 28.1%.