In the second and decisive round of the elections, the Turkish electorate decided to vote for President Recep Tayyip Erdoğan. Economists at Commerzbank analyze the Lira outlook after this past weekend’s election result.
The Lira after the election
“The Turks are prepared to accept inflation and the weak currency. Is that a likely moment for Erdoğan to admit that his low interest rate policy of the past years was wrong and has caused damage?”
“We have known since 2018 that the low interest rate policy is based on a misjudgment that could be clarified with the advice from monetary policy experts within seconds. The fact that this has not happened in the years that have passed since then is certainly not due to any lack of experts in Turkey. It can only be due to the fact that the President is not amenable to such advice – despite high inflation levels and continued lira weakness. I doubt that this will change in the moment of his electoral victory. As a result, I have to conclude that the erosion of the TRY’s value will continue. Probably even at higher speed than in the recent past.”