Turkish banks saw a significant rally on August 24, 2026, following the central bank's decision to shift funding from the 40% interest-rate corridor to the 37% policy rate. This move is seen as the first step towards monetary easing, benefiting the banking sector by reducing their borrowing costs.
The Borsa Istanbul Banks Index surged by as much as 4.7% in morning trading, marking its biggest intraday gain since late July. This rally was in anticipation of the central bank's third Inflation Report, which was expected to signal a potential return to the cheaper funding rate.
Analysts from Is Investment and Akbank anticipate further rate cuts. Akbank Chief Economist Cagri Sarikaya suggests a reduction in the funding rate from 40% to 37% at the September 10 Monetary Policy Committee meeting as a base scenario. Is Investment projects a 150-basis-point rate cut at the December MPC meeting, should oil prices stabilize around $80-$85 per barrel. Gedik Investment and Kuveyt Turk Investment also foresee a shift to weekly repo operations and potential rate cuts later in the year, particularly if geopolitical risks ease and oil prices normalize below $80 per barrel.
The central bank's decision to maintain the policy rate at 37% was accompanied by an upward revision of its year-end consumer inflation forecast to 28% from 26%. However, the bank emphasized that this revision was due to supply-side factors, such as diesel, natural gas, and non-energy commodity prices, and did not necessitate a policy response, signaling its inclination towards easing when conditions permit. Goldman Sachs analysts, in a report from February 23, 2026, also predicted Turkish bank stocks could see further gains in 2027, driven by weaker inflation and falling interest rates, although they noted that much of the upside for 2026 was already priced in.
