The Turkish lira has remained under significant pressure at the start of this week and there is a growing risk that the central bank’s continued obedience to pressure from President Erdogan for interest rate cuts results in sharp and disorderly falls in the currency over the coming days and weeks. That would cause inflation to rise even further and broader financial conditions to tighten. Strains would also build in the banking sector and, while it would require a prolonged bout of market stress before a wave of bank defaults became a serious threat, a credit crunch would almost certainly ensue.
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