The Turkish central bank’s decision to keep its key interest rates on hold today, despite pressure on the lira and the deteriorating inflation outlook, adds to the impression that monetary policy moves are being swayed by government influence and will further damage the central bank’s credibility. Predicting interest rate moves in this environment is difficult, but we remain of the view that a sharp rise in inflation over the coming months will, ultimately, force the MPC to tighten monetary conditions.
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