Strange Turkish central bank monetary policy drives the lira down; compounds the threat of hyperinflation

The Central Bank of Turkey surprised markets with a 100bps cut to 13%. It also signalled it intends to promote the use of the lira in the Turkish economy. Rate cuts have run concurrently with a spike in Turkish inflation, pointing to political interference as the country’s bizarre monetary policy continues. In response to the rate cut, the USDTRY has spiked to 18.0904, up almost 0.85% from its open of 17.9404. Given the rampant global inflation rate, USDTRY is at real risk of capitulation, promoting rampant inflation, due to this strange loosening of monetary conditions.