The Turkish lira had the worst month this year extending losses for the fifth day.

The currency dropped 0.8% to 8.2560 per dollar as of 11:41 a.m. in Istanbul, bringing its retreat this year to 28%.

Türkiye’s central bank raised its inflation projections for the end of this year by more than 3% after a series of interest-rate decisions failed to support a lira weakened by policy steps and international spats.

Disappointment that the central bank didn’t decide an interest-rate increase last 27 October 2020 has sent the lira to record lows every day this week.

Rising Covid-19 infections, uncertainty over the U.S. election, and the tensions with Europe have merely added to the negative situation.

On October 28, 2020, Murat UYSAL the Central bank Governor revised up inflation forecasts during a presentation in Istanbul. Inflation will end the year at 12.1%, up from a previous prediction of 8.9%. He said that Türkiye will have positive growth this year. Murat UYSAL said the lira is “extremely undervalued” and the country will register positive growth in 2020.

The governor said the revisions are based on the assumption that there would be no second wave of the coronavirus pandemic. As laid out in Türkiye’s new economic program announced by the government this September, the country’s inflation rate target is 10.5% this year, 8% next year, and 6% in 2022.

According to the latest data from the Turkish Statistical Institute, the country’s annual inflation rate in September was at 11.75%, down slightly from 11.77% the previous month

Tatha GHOSE, senior economist to Commerzbank AG in London said in a report: “There is no reason why the lira could not overshoot to a level such as 9.00 per dollar in the coming weeks”. “While rate hikes by the central bank would no longer act as a credible long-term policy response, we get the sense that a large emergency rate hike might be the only policy response we see in an attempt to break the momentum.”

Though the central bank unexpectedly held back from raising its one-week repo rate last week, it widened the interest-rate corridor to give itself more flexibility in increasing the weighted average cost of funding.

To support the currency so far this week, State-run lenders have also sold more than $1 billion according to two people with knowledge of the matter who asked not to be identified.

Berat ALBAYRAK, Türkiye’s Treasury and Finance Minister said multinational companies have already begun diverting production to Türkiye, which he said is at a “turning point.” “The new economic model proved itself by raising exports to the pre-pandemic level through production, investment, job opportunities, and a competitive exchange rate,” ALBAYRAK said.

This article was edited using data from the following websites: www.aljazeera.com, www.bloombergquint.com, www.bloomberg.com, www.bnnbloomberg.ca, and www.aa.com.tr.