Turkish lira outlook: Policy shift indicates progress, but bolder rate hikes needed for investor confidence

Al-Monitor Pro Members

Piero Cingari

Financial analyst

July 3, 2023

The recent rise in interest rates in Turkey could potentially signal a turning point for the Turkish lira, provided that the Central Bank of Turkey (CBT) continues to pursue a strategy of aggressive tightening in the coming months. However, given significant internal and external macroeconomic imbalances, there is little room for policy errors at this critical juncture. Hafize Gaye Erkan, the newly appointed governor of the CBT with prior experience on Wall Street, faces the daunting task of winning back the trust of foreign investors who have fled the country in recent years due to the currency's severe devaluation and unorthodox economic policies.