GBP/TRY, USD/TRY stuck at record highs ahead of CBRT decision

The Turkish lira remains at a record low ahead of the upcoming Turkish central bank decision. The GBP/TRY exchange rate was trading at 36 on Wednesday, 61% above its lowest point in January. Similarly, the USD/TRY rate jumped to 28.8, also higher than the January low of 18.50. 

The biggest Turkish lira news of this week will be the upcoming CBRT interest rate decision. In it, economists expect the CBRT will continue its interest rate hikes in a bid to fight the elevated elevation. Economists polled by Reuters expect the bank to hike rates by 2.50% to 37.50%. It will also hike its overnight borrowing and lending rate by a similar rate.

The CBRT has embarked on a hiking cycle in a bid to stabilise the currency. It has hiked rates in each meeting since June when the country concluded the highly-contested general election. In this period, rates have moved from 8.50% to the current 35%.

These rate hikes, together with other forex interventions, have not solved the inflation and currency crisis. The Turkish lira has continued crashing, making it one of the worst-performing currencies globally.

The most recent data showed that Turkey’s inflation rose to 61.53% in September and then retreated to 61.40% in October. Analysts expect that the country’s inflation will remain at an elevated level in the foreseeable future.

The CBRT is still fighting to heal its ailing currency. In addition to rate hikes, the central bank has implemented several interventions. For example, it has withdrawn over $34.5 billion in liquidity from the market. 

The bank has also encouraged individuals and companies to save in Turkish lira, which has helped lira deposits jump by 7% in the past three months. Depositors are now benefiting from double-digit returns on their lira deposits, with the average return on three-month Turkish deposits rising to 45%.