Weaker lira trend has resumed following a shift away from orthodox policy settings as the USD/TRY pair rose from 8.2472 to 8.2747 during April. Economists at MUFG Bank expect the Turkish lira to post new record lows in the year ahead.
Inflation is still expected to ease, creating a window for rate cuts
“Renewed lira weakness has increased upside risks to the inflation outlook, and should make the CBRT cautious over reversing rate hikes at the current juncture. When the opportunity arises, the CBRT is likely to lower rates sooner than under the previous leadership.”
“Inflation is still expected to ease in the second half of this year creating a window for rate cuts. We have been pencilling in at least a reversal of the last 200bps rate hike which could start as soon as this quarter.”
“We do not expect recent lira stability to last and expect it to fall to new record lows in the year ahead.”
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