BBVA warns Turkish lira investors of dollarization risks

In a report prepared by economists Adem İleri and Seda Güler Mert, the institution stated that the Central Bank of the Republic of Türkiye (CBRT) is expected to maintain its exchange rate strategy aimed at reducing the Turkish lira's accumulated real appreciation. The report highlighted the potential decline in net returns on lira-denominated investments and emphasized the need to closely monitor the risk of investors shifting back toward foreign currencies.

Commenting on the CBRT's decision to cut its policy interest rate by 100 basis points to 36%, BBVA Research expects the central bank to keep rates unchanged until a significant slowdown in inflation becomes evident. The institution forecasts that inflation could remain around 30% until late in the first quarter of 2027. However, it noted that an additional 100-basis-point rate cut could be considered in December if strong signals emerge that year-end inflation will fall below 30%. Elevated energy prices and persistent inflation expectations were identified as the main risks.