Following a decision by Turkey’s central bank to increase interest rates by 250 basis points in their December meeting, the Turkish lira saw a minor rise, reaching 29.1 against the USD. This marked the seventh consecutive rate hike, aligning with market predictions. However, the bank’s policymakers have indicated that it’s time to slow down the monetary tightening process, which they aim to conclude as soon as feasible.
Since the start of 2023, the lira has lost over 50% of its value against the USD. Interestingly, more than half of this depreciation happened before the new economic team took charge. This team, which includes the central bank governor and the finance ministry, was appointed in June. They have since adopted a more traditional approach, significantly raising interest rates and removing rules that mandated banks to purchase government bonds. Their goal is to curb inflation and regain investor confidence.