The exchange rate forecast for the Turkish Lira (TRY) against the US dollar (USD) reflects a complex interplay of domestic and international factors. Recent analysis indicates that the Turkish Central Bank has shifted its stance on monetary policy. In October, the Central Bank of the Republic of Turkey (CBRT) reduced its policy interest rate by 100 basis points to 39.5%, indicating a pause in its easing cycle due to rising inflation risks. Despite ambitions to meet a 16% inflation target for the end of 2026, actual inflation rates are expected to exceed these benchmarks.
Economists have highlighted that Turkey's economic growth projections are falling below government expectations, with GDP growth anticipated at around 3.3% in 2025, compared to the government's forecast of 4.3% for 2027. This underscores a continuously challenging economic environment, exacerbated by political instability, such as the significant market impact following the arrest of Istanbul Mayor Ekrem İmamoğlu. Such developments have previously led to sharp depreciation in the lira, driving the need for intervention using foreign currency reserves.
On the other side of the exchange rate, the USD has been under pressure. A recent drop in the US consumer price index, revealing a decline in inflation from 3% to 2.7%, has weakened the dollar. Analysts suggest this softer inflation data has amplified market expectations for aggressive interest rate cuts by the Federal Reserve starting in 2026, thereby diminishing the USD's yield advantage.
The current TRY/USD exchange rate of approximately 0.023394 reflects a slight decline of 1.5% against its three-month average, indicating relative stability within a narrow trading range. If anticipated economic data, particularly upcoming CPI and PCE releases, confirms a continuation of this downward trend in inflation, it may foster further weakness in the USD. Conversely, consolidation in labor market strength could complicate the Fed's decision-making.
Overall, the TRY is likely to remain susceptible to both domestic economic metrics and broader currency market trends as traders continue to react to changing interest rate expectations and geopolitical events. Stakeholders should remain vigilant, as the interplay of these factors could lead to significant volatility in the TRY/USD exchange rate in the coming months.
