15.05.202602:22:48UTC+00Turkish Lira Hits Record Low

The Turkish lira weakened beyond 45.5 per US dollar in mid-May, setting a new record low after the central bank signaled that disinflation will proceed more slowly than previously anticipated, amid energy and food price shocks tied to the Middle East conflict. This comes against the backdrop of a disinflation strategy that depends on preserving some degree of real appreciation in the lira, with the goal of preventing currency depreciation from outpacing inflation and gradually anchoring price stability. However, this framework is under pressure as inflationary forces remain strong. Policymakers now forecast end-2026 inflation at 26%, above the 15%–21% range projected in February. Meanwhile, consumer prices rose 4.18% month-on-month in April, lifting the annual inflation rate to 32.37%—a six-month high and above market expectations of 31%. In response, the central bank has left its policy rate unchanged at 37% for two consecutive meetings but has effectively tightened monetary conditions by extending funds at a higher 40% rate since the onset of the conflict.