The further hike in Turkish interest rates today merely underlines how vulnerable the economy is to the recent slowdown in capital inflows. Looking ahead, much will depend on how the current EM sell-off pans out and whether the lira comes under further pressure. For now, we think there could be further, albeit modest, hikes in the O/N lending rate over the rest of the year. But a sharp fall in the lira could be met by much more aggressive tightening.
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