The Central Bank of the Republic of Turkey (CBRT) raised the interest rate in its lira swap operation to 13.25% from 11.75% on Tuesday, continuing additional tightening steps in the face of a weakening Turkish lira.

Previously on Oct. 9, the central bank raised the rate to 11.75% from 10.25%, after unexpectedly hiking its benchmark interest rate the month before.

The Turkish lira swap rate, which was equal to the one-week repo rate earlier, became equal to the central bank's overnight lending rate with the Oct. 9 move. The rate has now been raised above the interest rate corridor.

With the latest moves that came one after another, the central bank continues to increase the funding cost of the lira by reducing the cheaper funding channels.

Currently, swap transactions are carried out by the CBRT with a one-week quotation method and traditional auction method with fixed terms of one, three to six months.

Besides, the central bank conducts swap transactions in the BIST swap market in line with the interest rates applied in the quotation swap market. Previously during the inflation report meeting, it was stated that the funding amount provided by the CBRT within the framework of all swap opportunities constituted approximately 60% of the system's funding needs.

Analysts, whose views were included in an Anadolu Agency (AA) report Tuesday, said that the increase in the interest rate applied in swap transactions – which has an important share in the funding need of the system – is a continuation of the steps taken to tighten monetary policy.

Several other important steps were taken by the CBRT most recently to raise the weighted average funding rate, such as the zeroing of the funding in the BIST Repo-Reverse Repo Market, the zeroing of the Interbank Money Market limits and the halt of quotation repo transactions, analysts said, stressing that the newest step has also been taken within the scope of those moves.