Turkish Lira: Easing path and carry appeal – ING
ING’s Frantisek Taborsky expects the Central Bank of the Republic of Türkiye (CBRT) to keep its policy rate at 37% for now, after normalising liquidity and lowering the effective funding rate.
ING analyst Frantisek Taborsky anticipates the Central Bank of the Republic of Türkiye (CBRT) to maintain its policy rate at 37% for now. After normalizing liquidity and lowering the effective funding rate from 40% to the policy rate, Indonesian bank expects two 100 basis point cuts to 35% in Q4. Despite weaker-than-expected Q2 GDP, gradual disinflation should allow for further easing.
Markets are already pricing a dovish path into year-end, with ING forecasting USD/TRY at 52 by year-end and 63 by end-2027. Liquidity conditions have normalized, driving market pricing more dovish towards the year-end forecast of 34.50% by CBRT rate. However, markets remain skeptical about additional easing next year, pricing around 100bp of cuts.
Continued disinflation could spur further dovish repricing in the curve. FX outlook remains largely unchanged, with long TRY positioning returning to pre-US-Iran conflict levels. The CBRT's dovish stance and renewed easing prospects should bolster investor demand for the TRY carry trade. ING predicts USD/TRY at 52 by year-end and 63 at the end of next year.
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