We expect the CBRT to deliver a 650 bps rate hike at the MPC meeting on 22 June, followed by two 500 bps hikes in July and August. This projected path is less aggressive than envisaged by the market consensus (as per Bloomberg) – but together with what is likely to be another solid tourist season with major inflow of hard currency, we believe that this will be enough to support the Lira. 

We expect USD/TRY to move to around 24 by end-3Q23 and for the Lira to significantly outperform forwards. However, the longer-term outlook remains clouded by political uncertainty.