Policy support to lira
The CBT’s bond purchases may be contributing to the lack of tightening in credit conditions. By pinning down the long-end of the curve, the purchases may have a direct impact on the pricing of long-term loans. The overall picture is of an overburdened central bank that is trying to keep short-term rates high to stabilise Turkish lira, but at the same time striving to avoid an overall tightening of monetary conditions. This ambivalent attitude to tightening suggests lasting policy support to Turkish lira is unlikely and depreciation pressures will reemerge as a result.