The Turkish lira slid today even though Turkey’s central bank raised some of its interest rates, including the key Marginal Funding Rate.
The Central Bank of Republic of Turkey increased its main interest rate from 8.5% to 9.25% and the lending rate from 10% to 11%. The one-week repo rate and the borrowing rate remained steady at 8% and 0% respectively. Apparently, markets had anticipated a stronger move from the central bank to support the currency, thus the disappointment and the drop of the lira. The currency fell even as the bank mentioned possibility of monetary tightening:
Future monetary policy decisions will be conditional on the inflation outlook. Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered.
USD/TRY rallied 0.66% to 0.0247 as of 18:43 GMT today.
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