Foreign Banks Update Expectations on Central Bank Rate Cycle and Dollar/TL Forecasts

Foreign investment banks have reshaped their outlook on the Central Bank of the Republic of Turkey’s (TCMB) interest‑rate cycle and the dollar/TL exchange rate. Their updated models emphasize that a rate cut could heighten the risk of Turkish lira depreciation, while at the same time projecting a stronger lira performance than the market had anticipated. The potential impact of a rate cut on the exchange rate is amplified by increased liquidity and higher risk premiums, raising the likelihood that the lira may depreciate in the short term. In such a scenario, currency volatility could exert pressure on the trade balance. Conversely, some analysts argue that the TCMB’s efforts to create a sustainable growth environment could support the lira. When combined with improving macroeconomic indicators and a strengthening external trade position, this view suggests the currency could remain stronger than expected. These updates signal that investors and institutions should reassess their risk‑management strategies. An uptick in the use of hedging instruments is anticipated to help minimize currency risk. This is not investment advice.