USDTRY has no sign of cooling down!
The Central Bank of the Republic of Turkey (CBRT) lowered the interest rates by another 100 bps to 13% on Thursday, while investors and market participants were waiting for interest rates to remain constant at 14%.
In the statement, policymakers repeatedly emphasized economic growth and cut the rates to support the businesses. CBRT policymakers believe that it is essential to have supportive financial conditions to see industrial activities growing. Increasing industrial and manufacturing activities can lift the labor market. That was the basis of the theory of decreasing the rates.
Lately, we could see that the central bank in Turkey has printed money to support the Treasury. The general idea now is that if we support the economy and business by increasing export, we can receive the foreign currency and support the current account surplus.
Maybe the main reason why the central bank in Ankara, unlike other economies, primarily focuses on economic growth rather than inflation is that with more than 80% inflation, it is almost impossible or will be so hard to bring it down with some decisions in the central bank. Therefore it is better to leave it for the market to adjust itself and for the government would be better to focus on supporting better business and economic conditions.
However, since administrative corruption has recently increased and banks are complicated to lend to, the success of this scheme is under question.
Thursday, and after the decision, the exchange rate rose to 18.15; the historical peak was already 18.36. Inflation, which is 80%, seems likely to approach 90% in October due to the exchange rate effect.
From the technical point of view, in all main charts, technical indicators support the bulls with the first target at 18.36 and then above 19 per US Dollar.
