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Economists Warn Against Inflationary Risks to Erdogan's FX-Linked Deposit Scheme

TURKEY

Economist Tim Ash via Twitter:

  • “Problem with new FX indexed deposit facility is inflation. If lira does not devalue, savers paid what? 14% on deposits but inflation still 30-50%. This scheme does not address fundamental inflation problem which deters holding lira.”
  • Moreover, as we have highlighted previously, inflationary dynamics from incetivised borrowing at artificially low policy rates is likely to bolster the credit impulse and potential money printing to compensate domestic deposit holders to cover FX fluctuations - adding to inflationary pressures
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

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