USD/TRY set to hit new highs at 9.00 by year-end – Standard Chartered


The Central Bank of the Republic of Turkey (CBRT) is likely to keep its weekly repo rate unchanged at 19.0% at its meeting on Thursday, August 12. Economists at Standard Chartered think CBRT will need to reiterate commitment to data-driven policy making, despite political pressure. Regarding the lira, they expect the Turkish currency to weaken and forecast new highs for the USD/TRY pair.

CBRT’s narrative on inflation and interest rate will be key

“The CBRT will have to provide a strong commitment to maintaining appropriately tight monetary policy to calm market sentiment. Evidence of a meaningful improvement in inflation expectations will be needed before rate easing, which we expect in Q4-2021. The tone and messaging from the August MPC statement will be closely followed.”

“Any significant and consistent slowdown in exports or FX earnings from tourism will exert further pressure on the TRY.” 

“We expect further currency weakness and see USD/TRY at 9.00 by year-end.” 

“The major downside risk to economic activity is pandemic related economic slowdown at both the global and domestic level.”

 



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