The Turkish lira edged down slightly to 38.1620 against the US dollar early Thursday as markets held their breath ahead of a highly anticipated interest rate decision from the Central Bank of the Republic of Türkiye (CBRT).

The slight depreciation of the lira reflects growing investor caution, with analysts broadly expecting the central bank to maintain its current policy rate. The decision, due later today, is seen as pivotal in determining the short-term direction of Türkiye’s economic stability, particularly as the country navigates a fragile market environment.

On Wednesday, the BIST 100 index dropped by 1.36% to close at 9,266.09 points, underscoring subdued sentiment across Turkish equities. The slide came amid growing speculation over both monetary policy and macroeconomic indicators, including the foreign exchange reserves data, which will also be released today. Observers are closely watching whether Türkiye’s reserves can sustain the central bank’s policy approach without putting further pressure on the lira.

Global factors are adding to the uncertainty. In Asia, markets showed signs of strain following warnings from U.S. Federal Reserve Chair Jerome Powell that renewed tariffs—particularly those proposed by former President Donald Trump—could reignite inflation and complicate monetary policymaking worldwide. The remarks pushed the U.S. dollar toward three-year lows, amplifying volatility across emerging markets.

Despite these headwinds, Türkiye’s central bank is expected to hold interest rates steady after a period of aggressive tightening aimed at reining in inflation. Any deviation from expectations—either a surprise hike or a cut—could trigger swift reactions in currency and equity markets.

Economists say today's decision will serve as a key signal of the CBRT’s commitment to monetary discipline amid rising global and domestic pressures. With inflation still running high and foreign reserves under scrutiny, the central bank’s messaging will be just as critical as the rate outcome itself. (ILKHA)