Political pressures on the Turkish central bank might be ignited to cut interest rates if there are any signs of weakness in economic activity. Currently, the CBRT is in a mode of wait-and-see because of the increased global financial markets volatility. When the volatility eases, the central bank is likely to go ahead with its aim to simplify its unorthodox monetary policy, which is to narrow the interest rate corridor that is currently at 7.25%-10.75%, and make it more symmetrical around the 1-week repo rate at 7.5%.

 "While the market mostly expects that the overnight borrowing rate, now at 7.25%, is likely to be raised, in our view the overnight lending rate at 10.75% could be lowered instead", says Rabobank.

If inflation decelerates and USD/TRY continues to trade below 3.00, the above mentioned scenario might take place and increase accordingly.