Weaker lira next year

Dunya Executive - - REPORT -

Tatha Ghose, emerging market analyst, Commerzbank:

We forecast the dollar-lira rate to continue rising after a brief pause. The Central Bank (CBT) is prepared to tolerate a fairly rapid pace of lira depreciation every year, even if this leads to higher-than-targeted inflation. This year we expect the CBT to tolerate higher inflation while it tries to find a way to support the real economy. Hence, the chances are that even if the CBT were forced to raise rates and tighten liquidity, it would reverse such steps as soon as the lira turned stable for a few months. But it would not be able to lower rates down to current levels if the Fed is hiking rates. We will end up with still-high interest rates and a weaker lira next year. (March 17)

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