Federal reserve holds rates, Türkiye eyes fall for possible cuts

On June 13, 2024, the dollar started the day at ₺32.30, with exchange rates at currency exchange offices ranging between ₺32.04 and ₺32.24 for buying and selling.

Regarding year-end dollar predictions, this week S&P Global Senior Director Frank Gill expressed an expectation of ₺32.50, while a report from Garanti BBVA projected ₺38.00. Despite the notable disparity between these forecasts, expectations are notably settling below ₺40.00.

Fed holds rates, projects reduced cuts for fall 2024

The Federal Reserve opted not to cut interest rates this month as expected. The latest Fed projections, providing future forecasts, showed a shift: while the March meeting anticipated three rate cuts by 2024, the updated projections now predict only one cut this year. The year-end policy rate forecast has been revised upward from 4.6% to 5.1%, indicating a potential single cut within the current range of 5.25-5.50%.

USD exchange rate on June 13

Meanwhile, questions like “When will the Central Bank of the Republic of Türkiye (CBRT) cut interest rates?” have been increasing in domestic markets lately, with discussions now turning towards expected cuts in the fall.

However, following the recent decision by the Fed, the evolution of these expectations will be closely monitored in the coming period.

As of June 13, 2024, the dollar started the day at 32.30 Turkish Lira (₺), while exchange rates at currency exchange offices in Kapalicarsi varied between buying and selling at ₺32.04- ₺32.24. The Euro was selling at ₺34.84 and the British Pound at ₺41.20.

Overnight ₺ interest rates, which dropped to around 50% recently, rose back above 51% yesterday.

2024 dollar expectations

As a result of the tight monetary policy implemented by the CBRT, approximately $20 billion in short-term “carry trade” transactions have been recorded in recent months, with increased foreign bond purchases.

There has also been an unwinding of nearly $30 billion in foreign exchange and precious metal accounts held by domestic residents. The positioning of ₺ interest rates above inflation expectations is deemed crucial. This policy supports a stable outlook for exchange rates.

End of year predictions: ₺32.50 or ₺38.00?

Additionally, two more predictions have emerged this week regarding dollar expectations for the end of 2024.

S&P Global Senior Director Frank Gill indicated no expectation of interest rate cuts by the CBRT in 2024, suggesting the dollar could end the year at ₺32.50. Given the proximity of this estimate to current levels, it is viewed as ambitious in markets.

In a report released by Garanti BBVA yesterday, the year-end dollar forecast was stated as ₺38.00. The report also projected a 43% inflation rate for 2024. These forecasts align closely with the May survey conducted by the CBRT.

Recent trends indicate that year-end dollar expectations are now notably positioned below ₺40.00.