USD/TRY: Lira to suffer another sell-off over the coming quarters – Commerzbank

Turkish inflation continues to record hefty, accelerating readings. Against this backdrop, economists at Commerzbank expect the lira to see another sell-off as an unchanged 14% interest rate will produce a deeply negative real interest rate

PPI inflation accelerates

“The latest sharp acceleration in PPI suggests that CPI inflation may accelerate substantially further over the coming months. Even if it were then to peak month-on-month, the observed year-on-year inflation rate will remain far higher than in recent years even over the medium-term.”

“The unchanging 14% benchmark interest rate will produce a deeply negative real interest rate – it is difficult to envisage a situation where this will not produce another lira sell-off at some point over the coming quarters.”