The Turkish lira exchange rate has temporarily stabilised after the government and central bank launched rescue measures. After a brief pause, analysts at Commerzbank anticipate the next big move in USD/TRY.

Turkey has the deepest negative real interest rate in decades

“There is very little chance that CBT can raise rates, no matter what the inflation rate accelerates to. Hence, we now have the deepest negative real interest rate we have observed for Turkey in decades, with essentially no upper-bound – because no inflation targeting in place. This is a disaster for the exchange rate outlook.”

“We think that the significant rise of long-term inflation expectations over the past month, relative to the unchanging central bank rate, has opened the door for the next big decline in coming months.”