Ahead of Central Bank’s interest rate decision, USD exchange rate against lira on the rise

* Photo: cilfa / pxhere.com

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Amid expectations that the Central Bank may lower the policy rate at its Monetary Policy Committee meeting on September 23, the depreciation of the Turkish Lira (TRY) has gained pace.

In early September, the exchange rate of the US dollar (USD) was as low as 8.27 TRY. However, following a speech by Şahap Kavcıoğlu, the Governor of the Central Bank, last week, the USD exchange rate increased from 8.43 to 8.65 TRY, the highest figure in the past 2.5 months. With 8.72 TRY, the USD exchange rate saw the highest figure since July 8, 2021.

As for the exchange rate of Euro, it has once again topped 10 TRY and seen 10.22 TRY while the exchange rate of the British pound to TRY, it is 11.96 TRY as of 11 am today (September 20).

The course of interest rates in Turkey

After Central Bank Governor Murat Çetinkaya was removed from office and Murat Uysal was appointed in his place, the Monetary Policy Committee took its first decision of interest rate cut in July 2019 and cut the policy rate from its current level of 24 percent to 19.75 percent.

After its meeting on September 12, 2019, the Monetary Policy Committee of the Central Bank lowered the policy rate to 16.50 percent. The Committee reduced the interest rate to 14 percent on October 24, to 12 percent on December 12 and to 11.25 percent on January 16, 2020.

On February 19, the Central Bank decreased the policy interest rate from 11.25 percent to 10.75 percent. In the meeting on March 17, the policy interest rate was reduced from 10.75 to 9.75 percent.

In its meeting on April 22, the Bank decreased the policy interest rate from 9.75 to 8.75 percent. On May 21, the interest rate was further reduced to 8.25 percent. The Bank kept this rate unchanged in June, July and August.

In its September meeting, the Monetary Policy Committee of the Central Bank decided to increase the policy rate (one-week repo auction rate) from 8.25 to 10.25 percent. The interest rate was kept constant on October 22.

On November 7, 2020, Naci Ağbal was appointed as the new Governor of the Central Bank of Turkey by a Presidential decree.

The Central Bank announced an interest rate hike, raising the policy rate from 15 to 17 percent in December 2020. It kept the policy rate (one-week repo auction rate) constant at 17 percent in January 2021.

At the meeting on March 18, the policy rate was increased from 17 to 19 percent. Following this move, Central Bank Governor Naci Ağbal was dismissed by a Presidential decision and replaced by Şahap Kavcıoğlu.

The interest rate has been kept unchanged at 19 percent by the Monetary Policy Committee of the Central Bank since then. (HA/SD)