The Turkish Central Bank has announced today that it will halve overnight borrowing limits of lenders for overnight transactions as of August 19th, 2020.
In its press release, the Bank said “In the framework of the tightening steps taken under liquidity management, banks’ borrowing limits at the Central Bank of the Republic of Turkey (CBRT) Interbank Money Market for O/N transactions will be reduced to half of their current limits effective from 19 August 2020.”
Following the pressure on the Turkish lira earlier this month, the Bank has been looking at more backdoor options to tighten money supply without taking the direct option of increasing the main policy interest rate, which is still at 8.25%. On August 12th, the Bank cut to zero liquidity limits offered to primary dealers as part of open market operations to reduce the supply of cheap funding. Market analysts are now looking to the Bank’s Monetary Policy Committee meeting on Thursday to announce its decision on interest rates.