FX.co ★ Gradual Slide in Turkish Lira Persists

In July, the Turkish lira further depreciated, hitting a new record low of 39.9 against the US dollar, as the central bank continued to exert strict control over the currency while allowing for a gradual decline. Since Mehmet Şimşek assumed the position of finance minister in 2023, he has been at the forefront of a transition towards more traditional economic policies, focusing on curbing inflation and bolstering investor confidence. The central bank increased interest rates to 50% in March 2024 and held them at that level until December, when it began reducing them. The current policy rate is set at 46%. Concurrently, inflation declined to 35.05% in June 2025, marking the lowest rate since November 2021, while GDP experienced a modest growth of 2% year-on-year in the first quarter of 2025, representing the weakest performance since the economic contraction of 2020. Simultaneously, the authorities have been striving to restore policy normalcy. The stock of foreign exchange-protected deposits, referred to as KKM, has significantly decreased, and the finance ministry has announced plans to phase out the program soon, indicating renewed confidence in the Turkish lira.