MediumIV Macro Policy & Sovereign Debt6 October 2026, Tuesday

Karahan says money leaving funds has largely returned to deposits

CBRT Governor Fatih Karahan told Parliament's Planning and Budget Committee on 6 October that most of the money leaving money market funds had moved into deposits. The lira share of total deposits has topped 61%, and loan growth has slowed from 35% in February to about 25%.

Location: ANKARA

According to Anadolu Agency on 6 October, Karahan said that money recently withdrawn from money market and similar funds had largely returned to banks as deposits. Hürriyet Daily News reported him as saying that retail investors continued to sell foreign currency and precious metals, and that demand for shorter-dated bonds had risen. The same report quotes Karahan as saying domestic and external developments had raised Türkiye's five-year credit default swap premium and currency volatility only modestly. Bloomberg HT's breaking-news ticker on 6 October quoted Karahan as saying outflows from funds had slowed in recent days.

Bloomberg HT reports that Karahan's presentation showed gross reserves at $171bn on 25 September, having fallen from $210bn on 27 February to $149bn on 26 June. Anadolu Agency says net reserves excluding swaps, the buffer left after deducting currency swaps with banks, stood at $40bn on the same date. Karahan said annualised core inflation fell to 23.7% in September and services inflation eased from 44.7% to 37.7%. The presentation also showed annual inflation of 46.1% in the energy group. It noted that the fuel price mechanism had limited the pass-through of the global supply shock by about 16 points.

Investing.com data show the two-year benchmark yield falling from 37.02% on 1 October to 36.42% on 6 October, below the 37% policy rate. Money leaving funds and staying in deposits protects the banking system. But reserves still $39bn below February narrow the room for a cut at the 22 October Monetary Policy Committee meeting.

Talay assessment

Bottom line

Karahan's message is that the fund crisis has not turned into flight from the banking system. Money staying in deposits and demand for near-dated bonds have pulled the two-year yield below the policy rate, reinforcing market expectations of a cut. The constraint lies in reserves: gross reserves are $39bn below the February peak and the net buffer is $40bn. The most likely path is a cautious cut on 22 October, with the CBRT prioritising reserve protection.

Likely effects

Banking systemPositiveWeeks
Fund outflows returning to deposits strengthen banks' lira funding and reduce the risk of the fund crisis becoming a systemic run.
Front-end yieldsUncertainWeeks
Rising demand for near-dated bonds has pushed the two-year yield below the policy rate, showing the market is pricing a cut.
Reserve bufferNegative1–6 months
A $39bn fall in gross reserves since February narrows the room to intervene against currency volatility and limits the pace of cuts.

Possibilities, ranked

1
Cautious cut55%
The CBRT makes a modest cut on 22 October, keeps stressing its tight stance and monitors the reserve recovery.
Watch: The 22 October MPC decision and weekly reserve data on 8 October
2
Rates on hold30%
Reserve losses and uncertainty over the fund crisis lead the CBRT to wait.
Watch: Gross reserves falling below $167bn or CDS rising above 260 basis points
3
Rapid easing15%
With deposit inflows and falling inflation, the CBRT delivers a larger cut than expected.
Watch: Year-end rate expectations in the October survey of market participants

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Market reaction

Indicators affected

Lira share of deposits▲ >61%
Loan growth▼ 35% → ~25%
Two-year yield (6 Oct)▲ 36.42%

Bottom line

Likely effects

Possibilities, ranked

Sources