The exchange rate of the Turkish lira against the dollar has temporarily stabilized after the implementation of rescue measures by the government of President Recep Tayyip Erdogan and the Central Bank of Turkey (TCMB). After a short pause, Commerzbank analysts expect the next big move in the exchange rate.
“It is very unlikely that the TCMB will be able to raise interest rates, regardless of the rate at which inflation is accelerating. Therefore, we now have the lowest real interest rate we have seen for Turkey for decades, with virtually no ceiling, because “There is no inflation target. This is a disaster for the exchange rate outlook,” said Commerzbank.
“We believe that the significant rise in long-term inflation expectations over the past month, relative to the central bank’s unchanged interest rate, has opened the door to the next big drop in the coming months.”
Petros Kranias
Source: Capital
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