Turkey’s CPI-based Real Effective Exchange Rate (REER) index fell to a fresh record low of 61.62 in September from 64.88 in August, central bank data showed on October 4.

The index stood at 85.19 at the end of 2017. In January, the index edged up to 85.87 but it subsequently showed declines at an escalating pace across the following eight months. The first all-time low level seen this year occurred in March. Things have worsened month by month since then.

A higher REER points to the Turkish lira (TRY) gaining value in real terms against foreign currencies while a decline in the index indicates it has lost real value.

The TRY was trading at 6.1707 against the USD, weaker by 2.0% d/d, as of 17:15 Istanbul time on October 4. In the year to date, the currency has lost more than a third of its value versus the dollar.

The TRY’s weakest ever level against the dollar, namely TRY7.24, was recorded on August 23.

Turkey’s annual consumer price inflation rate sprang from 17.9% in August to 24.52% in September, the Turkish Statistical Institute (TUIK) announced on October 3. The figure marked the highest level recorded since the end of 2003 and came in at a worse level than all expectations.

Given the shock caused by the latest inflation data, pressure is again mounting on the central bank to push up interest rates. Its monetary policy committee (MPC) will meet on October 25. At the MPC’s last meeting, on September 13, the rate-setters brought in a huge interest rate hike of 625 basis points. However, inflation is now running ahead of the benchmark interest rate of 24%.