Lira likely to suffer if the CBT disappoints – Commerzbank

FXStreet Insights Team FXStreet

Since the surprise interest rate hike on August 24, which gave the Lira a tidy 6% boost, the Turkish currency has been depreciating as if on a string. Economists at Commerzbank analyze TRY outlook ahead of the Turkish Central Bank (CBT) Interest Rate Decision.

CBT's restrictive monetary policy is only a necessary condition for a Lira recovery

If the CBT disappoints today, the Lira is likely to suffer. Because then all the analysts (including me!) will be speculating whether President Recep Tayyip Erdoğan had his fingers in the pie again. But if the CBT raises rates as expected or more, there is little chance of a sustained Lira recovery.

Unfair? Well, the CBT's restrictive monetary policy is – to use mathematicians' jargon – only a necessary condition for a Lira recovery. Turkey's policy mix would only be sufficient if the president's monetary turnaround were more credible to the market and to the public than it is at present.

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FXStreet Insights Team

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