Turkey: Anxiety Over the Istanbul Stock Exchange Reopening Tomorrow

On March 23, 2025, a ‘technical meeting’ was held between officials and commercial lenders to prepare for potential market volatility following the official arrest of a key opposition politician. Specifically, central bank officials discussed possible coordination with banks and assessed recent sell-offs in Turkish markets, according to Bloomberg. The meeting marks one of the first high-level gatherings between the country’s creditors and monetary authority since the popular mayor of Istanbul, Ekrem Imamoglu, was detained earlier this week, unsettling markets. The lira, Turkish stocks, and debt recorded some of the largest declines globally as investors weighed the risk of a potential economic policy reversal in Turkey. Finance Minister Mehmet Simsek met with banks on Friday (March 21, 2025), telling them that policymakers would use all tools at their disposal to mitigate what he called ‘temporary’ market volatility. Imamoglu, considered the most significant rival to President Recep Tayyip Erdogan, was jailed today on corruption charges. The court examining the allegations against him decided not to issue a separate, official arrest warrant for terrorism charges. The Central Bank of Turkey has already strengthened its mechanism to defend the lira to ensure financial conditions remain tight. Additionally, it raised the one-day borrowing rate by 200 basis points to 46%, increasing the average cost of funding for commercial lenders and suspended the lowest reference lending rate of 42.5% for an indefinite period. The bank also announced it would conduct liquidity bills auctions lasting 91 days, an action not seen in two decades, aimed at absorbing excess liras. Following these measures, the one-day lira reference rate, which serves as an indicator of daily funding costs, increased by over 3 percentage points to 45.7%.