The USD/TRY exchange rate opened this morning at 41.37 with a slight upward move. Since the beginning of the year, the lira has lost 14.5 percent of its value.
The Central Bank of Turkey (CBRT) has slowed its pace of rate cuts, lowering the policy rate by 250 basis points to 40.5 percent amid political concerns and strong economic data. Markets today are focused on domestic politics and new economic indicators.
Central Bank Signals Tight Stance
In its latest decision, the CBRT pledged that future policy steps will align with newly announced interim targets to maintain the level of tightness required for disinflation.
Last month, the CBRT separated inflation forecasts from official targets and introduced interim benchmarks to guide the country toward single-digit inflation. The new Medium-Term Program confirmed the 16 percent interim inflation target for the end of 2026.
A Reuters poll had expected the CBRT to slow its rate cuts and lower the one-week repo rate by 200 basis points to 41 percent after stronger-than-expected growth and inflation data.
Dollar Gains Despite Interventions
The dollar, supported by last week’s heavy forex sales, still started today with a modest rise at 41.37. The lira’s year-to-date loss stands at 14.5 percent.
Both equities and lira-denominated bonds experienced sharp sell-offs last week, a trend that has carried slightly into this week.
Today, markets are watching July’s balance of payments data and the September market participants survey. Analysts expect a current account surplus of 1.58 billion dollars in July, but for the year as a whole, a deficit of 20 billion dollars is projected.
Reserves Hit Record High
Despite selling 5.3 billion dollars in forex last week to stabilize the market, the CBRT’s gross reserves rose by around 2 billion dollars to reach a record 180.2 billion. These sales helped cushion the lira against rising domestic political risks.
Politics Add to Pressure
Concerns also mount as a court will hear on September 15 the case seeking to annul the main opposition CHP’s congress, where Özgür Özel was elected chairman. Speculation over the possibility of appointing a trustee to the party leadership has intensified political uncertainty.
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