Commerzbank analyst Tatha Ghose has highlighted rising risks for the Turkish Lira (TRY) ahead of the Turkish central bank’s (CBT) key rate decision this week, noting that inflation expectations for 2026 have increased to nearly 28% year-on-year from 25% in March, according to the CBT's latest survey. This upward revision is attributed in part to the fallout from the Iran war, though expectations had already been trending higher for several months prior [1].
Ghose points out that CBT governor Fatih Karahan and Finance Minister Mehmet Simsek reportedly met with investors at the IMF conference, where their remarks were interpreted as signaling hesitation about hiking rates. This comes despite the CBT’s depleted reserves after repeated interventions to stabilize the lira through ad hoc measures [1].
Commerzbank still anticipates a significant monetary tightening step at the upcoming Wednesday meeting. However, Ghose warns that if the CBT fails to deliver this tightening—potentially due to political pressure—it could trigger a sharper sell-off in the lira as markets reprice lira risk higher. Market participants have already raised their year-end USD/TRY forecast to 51.23 from 50.97 in April, with Commerzbank’s own forecast at 55.00. The 12-month forward expectation for USD/TRY has also increased to 53.62 from 52.70, indicating a broader repricing of lira risk underway [1].
CONCLUSION
Commerzbank sees significant risk for the Turkish Lira if the central bank hesitates on rate hikes, with market expectations for USD/TRY and inflation both rising. The upcoming CBT decision is viewed as crucial, with the potential for a sharper lira sell-off if decisive action is not taken.