The Russian ruble and Turkish lira have been among the hardest hit EM currencies this quarter and this has already started to feed through into the real economy. Inflation is on the rise (again), extending the squeeze on consumers. And central banks have had to react. Russia didn’t cut rates this month, having done so at every previous MPC meeting this year, while the Turkish MPC has sounded increasingly hawkish (with rate hikes only avoided thanks to inaction by the US Fed). Persistent capital outflows and an excessive dependence on oil in Russia and a large current account deficit in Turkey mean both currencies are likely to weaken further, adding to the reasons to think economic activity will be disappointingly weak
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