On Wednesday, the lira firmed to 5.6645 against the US dollar, marking the first time it strengthened beyond 5.70 to the dollar since August 20. It has gained about 2% since the inflation data was published. Economists say the inflation figures pave the way for another interest rate cut next week, after the central bank sharply cut its key rate by 425 basis points to 19.75% in July.
"The scale of the cut will be determined by the global risk appetite at that time. Looking at the central bank's previous statements, there could be a 200-250 basis point cut at next week's meeting," said Serkan Gonencler, an economist at Seker Yatirim. Another hefty rate cut, however, could leave the currency vulnerable to shocks stemming from global developments, said a chief forex trader at a bank, adding that global risk appetite would play an important role in the potential rate cut. "What we saw in the markets yesterday is a shift to positive pricing due to next week's central bank interest rate decision being backed by data," the trader said.