Turkish Lira Drops as Central Bank Refrains from Action

The Turkish lira fell today after yesterday’s decision of the nation’s central bank to keep its borrowing costs stable. Policy makers refrained from action even as inflation accelerated due the drop of the currency.
The Central Bank of the Republic of Turkey kept all of its interest rates unchanged during yesterday’s meeting and said that “the tight monetary policy stance will be maintained”.
The outlook for monetary tightening from the Federal Reserve drove currencies of emerging markets, including the lira, down. This led to spike of consumer prices last month, pushing inflation above the central bank’s target. Yet policy makers think that the surge of consumer inflation is temporary and should subside. The central bank’s statement said:

Macroprudential measures taken at the beginning of the year and the tight monetary policy stance continue to have a favorable impact on the core inflation trend. Moreover, declining commodity prices, in particular oil prices, will contribute to disinflation.

USD/TRY rose from 2.3180 to 2.3188 as of 14:42 GMT today. EUR/TRY advanced from 2.8303 to 2.8410.

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