Turkish Lira: Easing cycle resumes as carry trade holds – ING
ING’s Frantisek Taborsky expects the Central Bank of Turkey to resume easing, cutting rates by 100bp to 36.00%, with further 100bp cuts in October and December to 35% by year-end. He notes improved inflation sentiment and contained fund-related risks but warns of weaker domestic demand. Despite crowded long TRY positions, he sees the carry trade persisting and forecasts USD/TRY at 51.50 by…
Turkish Lira easing cycle resumes as carry trade persists, according to ING analyst Frantisek Taborsky. The Central Bank of Turkey is expected to cut rates by 100 basis points to 36.00% in September, with further cuts of 100 basis points in October and December, bringing the policy rate to 35% by year-end. Despite crowded long TRY positions, Taborsky sees the carry trade continuing and forecasts USD/TRY at 51.50 by year-end.
September's inflation data showed positive signs, while investment fund developments suggest economic risks for the final quarter. Weaker domestic demand could result from tighter liquidity, wealth losses, and lower confidence. Repayments to smaller investors may cushion consumption, but counterparty exposures remain the primary spillover risk.
Inflation sentiment has improved after September's data, and ING expects 100 basis point cuts in October and December, reaching 35% by year-end, compared to a forecasted 29.0% inflation for the end of the year.
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