President Erdogan’s latest comments suggest that the recent changes in Turkey’s economic management team may herald a shift back to orthodox policymaking. If these developments are backed up by a sharp interest rate hike at next week’s MPC meeting – we now expect the one-week repo rate to be raised by 450bp – the recent rally in local financial markets may have further to run, at least over the next three months or so. But there are plenty of reasons to be sceptical that this shift to orthodoxy will be sustained.
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