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Turkey’s Central Bank Cuts Rates by 100 Basis Points; USD/TRY Remains Volatile

USD/TRY Back to Highs on Mention of Further Potential Cuts

The Central Bank of the Republic of Turkey (CBRT) cut rates by 100 basis points and leaves the door open for further easing in December.

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Immediate response saw the Lira trade at recent lows despite a modest pullback leading up to the announcement.

USD/TRY 5 Minute Chart

Turkey’s Central Bank Cuts Rates by 100 Basis Points; USD/TRY Remains Volatile

Chart prepared by Richard Snow, IG

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Turkish Lira Under Strain as one of the Worst Performing EM Currencies

The Turkish Lira surrendered more than 9% over the last three days in anticipation of the rate announcement which would suggest a rate cut has already been priced in by the market.

USD/TRY Daily Chart

USD/TRY daily chart

Chart prepared by Richard Snow, IG

Turkish Dilemma

The Central Bank of the Republic of Turkey is currently dealing with inflationary pressures pushing 20%, as per the latest CPI (YoY) figure of 19.89%, well above the 5% target. Traditionally, monetary policy would favor a rate hike in an attempt to rein in inflation but a hike would in turn place more of a burden on the Turkish government to service USD and EUR denominated debts – which have reportedly increased over the short- term. For more on this, read the full report here.

Turkey’s Inflation Data 2021

Turkey’s Central Bank Cuts Rates by 100 Basis Points; USD/TRY Remains Volatile

Source: Tradingeconomics, Turkish Statistical Institute

More on the Emerging Market Front

The South African Reserve Bank (SARB) has its latest policy rate decision due at 13:00 GMT

Turkey’s Central Bank Cuts Rates by 100 Basis Points; USD/TRY Remains Volatile

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

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