Turkey has been in the grips of a currency crisis which forced the central bank to hike interest rates by 300bp on 23rd May, but that only provided brief respite for the lira. For now, there are signs that President Erdogan has taken the hint. He kicked off his election campaign with pledges to tackle inflation and the large current account deficit and – perhaps most importantly – didn’t renew his calls for lower interest rates. Markets no doubt want clearer evidence that policymakers are willing to bring down high (and increasingly unanchored) inflation. If that’s not forthcoming, the sell-off is likely to gather pace and pressure for another rate hike – possibly at the next scheduled MPC meeting in early June – will mount.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services