Commerzbank Sees Lira Depreciate Further Against Dollar Amid Inflation Pressures

Turkey's lira continues to weaken against the US dollar, according to Commerzbank FX analyst Tatha Ghose. The bank forecasts a significant increase in the USD/TRY exchange rate from 48.00 in September 2026 to 57.00 by December 2027.

The main drivers of this depreciation are persistent inflation pressures and renewed current account deterioration, says Ghose. Turkey's reliance on energy imports and its deep trade and financial linkages to the Middle East exacerbate pre-existing balance of payments vulnerabilities.

Ghose notes that the central bank's tight monetary policy has not solved the inflation problem yet. In fact, the latest seasonally-adjusted month-on-month CPI increase is a concern, with actual year-end forecasts revised up to 28% in Q3, despite an optimistic target of 24% for end-2026.

The central bank is caught between maintaining high interest rates and restarting one-week repo funding, which would mechanically lower the effective funding cost. However, this would be tantamount to a rate cut, which could further destabilize the currency.