Central Bank announced: Turkish Lira reached the highest level in 6.5 years!
CPI-based real effective exchange rate index increased by 2.66 points and reached 107.76 in October
Quick Look
- According to the CBRT's October Real Effective Exchange Rate Developments report, the real value of the Turkish lira continues its upward trend.
- The CPI-based index increased by 2.66 points to 107.76, and the D-PPI-based index increased by 1.67 points to 102.90.
- While the dollar gained 1.63% in value against TL, the euro lost 1.07% in value.
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Why It Matters
CBRT published the Real Effective Exchange Rate Developments report for October, which is closely followed by the markets and economic circles. The report states that the upward momentum in the real value of the Turkish lira continued unabated in October.
The Central Bank of the Republic of Turkey (CBRT) published the "Real Effective Exchange Rate Developments" report for October, which is closely followed by the markets and economic circles. According to the announced data, the upward momentum in the real value of the Turkish lira continued unabated in October.
According to CBRT data, the CPI-based real effective exchange rate index, which reflects the purchasing power of the Turkish lira, increased by 2.66 points compared to the previous month and reached 107.76 in October. With this sharp increase, the real effective exchange rate reached the highest level since February 2020. On the other hand, the previously announced September index was revised from 105.45 to 105.10.
THE INCREASE ON THE BASIS OF PRODUCER PRICES CONTINUES
The real effective exchange rate index, calculated on the basis of the Domestic Producer Price Index (D-PPI), increased by 1.67 points to 102.90 in the same period. With the latest data announced, the real value of the Turkish lira recorded a significant increase of 7.79 points on a CPI basis and 2.58 points on a D-PPI basis compared to the same period last year.
DOLLAR GAINED IN VALUE, EURO DECREASED
In the CBRT's report, attention was also drawn to the direct effect of the change in exchange rate and inflation dynamics on the real exchange rate. According to the evaluation in the report, when the components affecting the CPI-based index are examined; While the dollar gained an average of 1.63 percent in value against the Turkish lira compared to the previous month, the euro lost an average of 1.07 percent in value. In the same period, CPI in Türkiye increased by 2.58 percent and D-PPI increased by 1.65 percent compared to the previous month.
In its evaluation, the Central Bank also stated that the change in consumer inflation (CPI) in Türkiye and the mobility in the Nominal Exchange Rate Basket contributed to the increase of the index (real appreciation of TL); It was emphasized that the change in the World CPI Basket had a decreasing effect on the index.
Open Questions
- What are the long-term effects of an increase in the real effective exchange rate on consumers and producers?
- What steps does the CBRT plan to take in monetary policy in response to this data?
