Economic Update: Turkish Lira Declines Amidst Inflation Pressures
The Turkish lira has reached a significant low in both Turkey and North Kurdistan, with the US dollar trading at over 36 liras. On Monday, the exchange rate was recorded at 36.03 liras for one US dollar in Istanbul, while one euro stood at 36.90 liras.
Initially, the Turkish lira was valued at 35.88 liras per US dollar. However, in response to the announcement from the Turkish Statistical Institute regarding the previous month’s inflation rate, the dollar increased by 0.48 percent against the lira.
Factors contributing to the lira’s decline against the dollar and other foreign currencies include the recent inflation data released by the Turkish Statistical Institute and projections from Morgan Stanley, which posits that the dollar could reach 39 liras by mid-2025.
In a related context, the Central Bank of Turkey made its predictions in late June 2024, estimating that the dollar might trade at 41.41 liras within a year.
Another critical driver of the lira’s depreciation has been the Central Bank’s decision to lower interest rates. After a sustained period, the interest rate was cut from 47.5% to 45% on December 23, which failed to stabilize the lira.
Since September, the lira has continued its downward trend against the dollar and other currencies, correlating with rising economic inflation and a static interest rate environment. Over the past 18 months, the Turkish lira has lost approximately 16.4% of its value.
Before the parliamentary elections held on May 14, 2023, the dollar traded at 19.60 liras. Following the second round of presidential elections on May 28, the dollar surpassed 20 liras for the first time, ultimately reaching 26 liras on June 26.