Turkey: Emergency rate hike? - Rabobank

After the selling pressure on the lira resurfaced following a very brief period of stabilisation, Governor Cetinkaya may have to hold an emergency meeting to deliver a proper dose of monetary policy tightening, according to analysts at Rabobank.

Key Quotes

“Allowing the lira to fall precipitously would not only prolong the period of a double-digit inflation, it could also negatively affect sentiment amongst households and corporates leading to a sharp slowdown in economic activity.”

“Given the substantial external liabilities of Turkish companies, which borrowed extensively in hard currencies due to the significant interest rate differential, a weaker lira could cause a financial crisis in the worst case scenario.”