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MNI Analysis: Lira In Crisis - Extrapolating The Erdogan Endgame

TURKEY

Turkey currently faces an inordinately difficult task of anchoring inflation expectations and re-establishing CBRT credibility in the face of broad, and accelerating currency weakness. This leaves the CBRT with a stark menu of policy options from which to choose to stem the risks to the real economy. Among the best options are delivering positive real rates through a series of large emergency rate hikes, but the bank could also resort to previously used non-standard policy tools to counter TRY weakness. These include rate corridors, tweaking reserve requirements at state banks, clamping down on currency speculation and the likely last resort: capital controls.


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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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