The eruption of a high-level corruption scandal in Turkey over the past few weeks has cast a spotlight onto the country's political stability. Better governance appears to have played a key role in attracting the foreign capital inflows that have underpinned Turkey's improved economic performance over the past decade. As such, if the political situation remains volatile for a prolonged period, the economic consequences could potentially be severe. In the meantime, the recent fall in the lira has raised the prospect of an interest rate hike, perhaps at this month's MPC meeting.
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