USD/TRY tested above 14.81 yesterday before the Federal Reserve’s (Fed) interest rate decision yesterday. USD/TRY breaks another record at 15.15 today, before the Central Bank’s policy rate decision.
The Fed kept the interest rate steady and left the federal funds rate at a range of 0 to 0.25% in line with expectations.
The Central Bank comes up next. Many international financial institutions and economists forecast the bank to further lower the policy rate by 100 basis points to 14%. The bank’s interest rate decision will be determinative in the pace of TRY’s devaluation, according to Dr. Burcu Aydin Ozudogru, lecturer at Bilkent University.
TRY’s depreciation against USD has exceeded 50% this year due to frequent changes in the economic and Central Bank’s management as well as concerns over President Recep Tayyip Erdogan’s demand for low-interest rate and economic plan stipulating production, export, and current account surplus. 45% of the devaluation took shape at the beginning of September when the Central Bank gave the first interest rate cut messages. The bank is still expected to lower the policy rate although concerns over inflation raises in the country.
The real sector and investors are confused, according to daily DUNYA columnist Atilim Murat. Banks cannot calculate the cost of loans as they can’t predict the inflation hike. Enterprises cannot manage the foreign exchange (FX) risks due to fluctuating FX rates, which rise and fall by 7-8% every day. The value loss in TRY assets due to high inflation paves the way for investors to buy FX and gold. As Murat says, these uncertainties can’t be removed only with the interest rate increase. Inflation is estimated to see 30% in the upcoming months, according to many institutions.
DAILY AGENDA
Private sector’s outstanding loans received from abroad dropped by USD 3.1bn to USD 169.8bn in October, compared to the end of 2020, according to the Central Bank.
The Central Bank’s Monetary Policy Committee (PPK) convenes at 14.00 PM to make the policy rate decision.
The Central Bank will announce the Residential Property Price Index for October (2.30 pm).
The Central Bank and the Banking Regulation and Supervision Agency (BDDK) will release weekly money and banking statistics (2.30 pm).
The legislative proposal to increase penalties within the scope of the fight against stockpiling starts to be discussed at the Parliament’s Committee on Industry, Trade, Energy, Natural Resources, Information and Technology.
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