Turkey’s Rate Pause Shapes Up as Stress Test for Lira: Day Guide


Turkey’s Rate Pause Shapes Up as Stress Test for Lira: Day Guide


Turkey is set to prolong its unprecedented experiment in monetary policy for another month, though the cost to the lira is increasingly calling the approach into question.

The worst performer in emerging markets this year, Turkey’s currency has weakened more since the central bank last convened in April than during the previous three months combined. Throughout it all, policy makers have bided their time, leaving borrowing costs unchanged at every meeting this year.

Deeply negative rates — when inflation is taken into account — are a key driver of the depreciation, alongside a global rally in commodities prices and a drawdown in international reserves. Economists are unanimous that the central bank on Thursday will again keep its benchmark at 14%.

Little relief is in sight for the lira because the central bank remains set on an ultra-loose course. Sahap Kavcioglu, appointed as governor after President Recep Tayyip Erdogan ousted his predecessor for tightening policy too much, has signaled Turkey didn’t need to increase rates just because other central banks are doing so.

Long championed by Erdogan, the belief that higher rates fuel price increases goes against textbook assumptions held by central bankers around the world. The Turkish government is supportive of Kavcioglu’s low-rate policy to boost growth, especially with just over a year left before elections.

What Bloomberg Economics Says…

“Tightening policy isn’t politically viable, despite all indicators pointing to an economy in need of higher rates. The lira could, again, pay the price for this policy error.”

In place of higher rates, Turkey has relied on backdoor interventions and the introduction of state guarantees for some bank accounts to shield depositors from lira weakness.

Until now, the approach ensured a period of stability. Kavcioglu has said consumer price growth, currently at a 20-year high of nearly 70%, could start slowing as early as June and disinflation will gather momentum at the end of the year.

But inflows into the so-called FX-protected accounts have slowed in recent weeks and the central bank’s reserves are down sharply, leaving it with a small backstop to support the currency. Excluding swaps with commercial lenders and other central banks, Turkey’s net foreign assets have reached negative $63.3 billion, according to Goldman Sachs Group Inc.

The existing policies have also done little to address the causes of a sharp deterioration in domestic confidence that has weakened the lira. As inflation spirals higher, public discontent over the management of the economy is rising.

For investors, Turkey’s standoff with its NATO allies is another drag on the country’s assets. And with commodities prices soaring after the Russian invasion of Ukraine, Turkey’s current account is falling into deeper deficit, further pushing up demand for foreign exchange.

The selloff has by now pushed the lira to the weakest level since a round of rate cuts contributed to its rout late in 2021.

It’s lost over 18% versus the dollar so far this year, depreciating past 16 per greenback and now at risk of reaching 19 by the end of this quarter or soon after, according to Cristian Maggio, head of portfolio strategy at TD Securities in London.

“The dire state of Turkey’s macrofinancial conditions” — from inflation to the current-account deficit and deeply negative real rates — “spells disasters to come for the lira,” he said.

hoki88 link slot gacor situs slot thailand link slot thailand m77casino link slot link slot gacor jonitogel depo 10k deluna4d psgslot rtp slot gacor slot thailand gacor wajik777 gudangtoto gudangtoto gengtoto m77casino daftar allototo slot thailand slot thailand https://smktangeranglobal.sch.id/ congtogel gacor ladangtoto gacor ladangtoto2 mw68 daftar gacor m77 slot gacor gacor131 gacor link slot gacor thailand hoki88 ladangtoto dan ladangtoto2 gacor slot gacor situs togel 100 perak slot anti rungkat mawartoto gacor slot depo 5k gacor88 gacor sv388 sabung ayam online gacor131 daftar gacor 131 akun pro pg soft allototo daftar situs slot depo 10k allototo togel depo 10k akun pro thailand mas77toto ladangtoto ladangtoto gacor ladangtoto2 ladangtoto daftar slot mahjong ways slot deposit 5000 slot hongkong https://bet-togel.supfen.com/ https://gacor131.supfen.com/ https://ladangtoto.supfen.com/ kakek merah 4d gacor gacor131 Dan Gacor88 https://mahjong-ways-2.supfen.com/ kakek merah slot https://dewasloto.tagtoyota.co.id/ slot kamboja slot thailand slot vietnam gacor88 mw68 login gacor ladangtoto daftar ladangtoto2 mw68 daftar gacor dewaslot daftar gacor slot777 jonitogel link slot kakek merah slot 4d ladangtoto gacor88 gacor88 togel jepang https://bet-togel.tagtoyota.co.id/ gacor77 daftar https://ladangtoto.tagtoyota.co.id/ link slot mahjong tergacor https://akun-pro-hawaii.tagtoyota.co.id/ togel jepan gacor88 link slot ladangtoto slot depo 10k gacor berita138 mas77toto daftar slot dana slot mahjong daftar m77 daftar ladangtoto daftar mw68slot daftar mw68slot daftar mw68 mw68slot daftar ladangtoto daftar slot anti rungkat daftar mas77toto daftar m77 daftar m77 daftar slot deposit 5000 daftar allototo daftar mas77toto daftar mw68slot daftar mw68 daftar mas77toto daftar mas77toto daftar mas77 mas77toto daftar mas77toto daftar mas77toto daftar mas77toto daftar ladangtoto daftar ladangtoto2 akun pro hawaii gacor bandar slot gampang maxwin gacor88 daftar gacor ladangtoto dan ladangtoto2 gacor m77casino gacor ibu4d login disini jonitogel gacor88 login gacor 66kbet login ibu4d gacor ibu4d daftar allototo daftar 66kbet daftar 66k.one 66kone daftar gacor 66kbet daftar 66k bet kakek merah gacor slot thailand gacor slot server thailand gacor situs77 daftar m77 pptoto pptoto pptoto mw68 mw68 gacor slot maxwin slot depo 10k ladangtoto mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 mw68 ladangtoto java303 slot88 link slot orangtuaslot mantra88 top1toto ladangtoto slot anti rungkat mw68slot slot thailand gacor88 gacor88 slot depo 5k gacor131 pptoto jonitogel slot thailand gacor88 ladangtoto gacor88 bom29toto ladangtoto gacor88 slot thailand gacor88 pptoto slot mahjong ways slot dana slot bank jago slot gopay ladangtoto slot77 gacor88 gacor131 gacor88 pptoto mas77toto ying77 ladangtoto2 ladangtoto ladangtoto mahjong ways 2 slot depo 10k dewaslot gacor88 gacor88 gacor88 kakek merah slot mw68 mw68 joker123 slot1000 slot depo 10k slot thailand sv388 sabung ayam online wajikslot gacor88 12shio gacor88 slot77 akun pro hawaii situs togel bet 100 perak gacor88 ladangtoto slot triofus m77casino gengtoto mw68 link gacor88 bandar slot gacor joker123 ladangtoto sdtoto congtogel panutantoto slot mahjong ways gacor303 gacor88 slot depo 10k slot thailand slot dana 5000 slot2000 gacor88 ladangtoto dragon77 gacor 12shio gacor slot hongkong gacor joker123 gacor slot gacor udintogel gacor slot depo 10k mawartoto gacor pastijp petir388 slot2000 ladangtoto slot77 mamislot oyuki88 instaslot88 jonitogel gacor slot mahjong ways gacor osiris4d gacor osiris4d gacor osiris4d gacor osiris4d gacor inatogel hometogel raja88 dragon77 slot303 gacor303 hoki88 ladangtoto pastijp mas77toto slot777 sv388 qqcuan slot maxwin slot linkaja gacor88 udintogel hoki88 mas77toto slot mahjong situs bet togel slot kamboja gudangtoto m77 slot m77 slot gudangtoto situs togel slot hongkong slot gopay slot ovo rtp slot