USD/TRY signal and the CBRT interest rate decision preview

The USD/TRY pair has been in a bullish trend in the past few weeks as demand for the Turkish lira fades. The pair is trading at 14.68, which is about 43% above the lowest level this year. It is slightly below the all-time high of 18.40.

CBRT decision ahead

The Central Bank of the Republic of Turkey (CBRT) will conclude its two-day meeting on Thursday. Analysts expect the bank to leave the interest rate unchanged at 14%, where it has been in the past few months.

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The CBRT has been under pressure recently. As you recall, the bank went against the grain in 2021 and decided to implement several rate cuts even as inflation was soaring. In all, it slashed rates from 20% to 14%, which was an unorthodox strategy in a period of high inflation.

Recent data have shown the impacts of these rate cuts. For example, according to the Turkish statistics agency, headline inflation has surged to almost 50%. Unofficial estimates show that the overall rate is nearing 70%. 

Analysts expect that the country’s inflation will keep rising in the coming months. For one, Turkey is a net importer, meaning that it will pay more for imports like those of energy and other raw materials. 

The CBRT will avoid rate cuts as it focuses on other approaches to stabilize the Turkish lira. For example, the government has committed to pay its depositors any difference in the value of the lira. Analysts believe that the saving scheme is equivalent to a rate hike. 

This being an election year, the Erdogan administration has also announced other measures such as lowering the VAT on consumer staples from 8% to 1%. It is also considering lowering the cost of electricity.

USD/TRY forecast


The daily chart shows that the USD/TRY pair has been in a bullish trend in the past few months. It has moved from the year-to-date low of 10 to the current 14.68. Along the way, the pair has moved above the 25-day and 50-day exponential moving averages. It has also moved above the key resistance level at 13.95. 

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