FX.co ★ Turkish Lira Extends Controlled Weakening

The Turkish lira reached an unprecedented low of 43.3 against the USD in January, continuing the Central Bank of Turkey's strategy of managed depreciation as financial markets examined the anticipated currency flows for the year. The central bank has been actively managing its foreign exchange reserves and has put measures in place to encourage domestic investors to increase their lira deposits, aiming to control the rate at which the currency depreciates. It is anticipated that the lira will decrease in value by approximately 18% against the dollar this year. Concurrently, the TCMB reduced its benchmark policy rate by 10.5 percentage points to 37% during its January meeting, citing a deceleration in underlying inflation as justification for easing the intensity of restrictive policies, despite elevated food prices contributing to the headline inflation rate. The latest inflation figure remains near 31%, significantly exceeding the 27% increase in the national minimum wage for the year, thus continuing the trend where official inflation statistics understate the pressure on purchasing power.