My subscription
...
Filters
My Subscription All Publications

Turkey & policy responses during past “sudden stops”

The Turkish lira’s sharp fall yesterday looks similar to the experience of sudden stops elsewhere. In those instances, central banks usually responded with interest rate hikes of around 600bp as well as other regulatory measures, which supported a recovery in currencies. But it seems unlikely that policymakers in Turkey will follow this script.
Jason Tuvey Senior Emerging Markets Economist
Continue reading

More from Emerging Europe

Emerging Europe Data Response

Russia Consumer Prices (Jul.)

Russia’s month-on-month deflation deepened in July as consumer prices fell by a larger-than-expected 0.4% m/m (in y/y terms, the headline rate eased to 15.1%). The disinflationary impact of the strong ruble is likely to fade but with consumer demand so weak we think the headline inflation rate will fall towards 12% y/y by year-end. We think this will prompt a further 100bp of rate cuts, to 7.00%, later this year. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

10 August 2022

Emerging Europe Economics Update

EU & the rule of law dispute: why do EU funds matter?

EU funds will provide a key boost to economies in Central and Eastern Europe in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the European Commission over the rule of law in Hungary and Poland look close to being resolved, but the risk of funds being halted indefinitely remains high and would weigh heavily on growth in both countries. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

10 August 2022

Emerging Europe Economics Weekly

Rate hikes nearing an end, CBR’s reform ambitions

The Czech central bank’s decision to keep its policy rate on hold this week, while Romania’s hiked rates, is representative of a growing divergence between central banks in the region. We think Poland’s central bank will be the next to end its tightening cycle, while those in Romania and Hungary will remain hawkish for a few months yet. Elsewhere, Russia’s central bank set out a number of potential measures intended to help the financial system, which show that policymakers are seeking to live with Western sanctions for the long haul.
Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

5 August 2022

More from Jason Tuvey

Emerging Europe Economics Update

Lira in freefall as policymakers remain defiant

The Turkish lira has plunged this morning after President Erdogan signalled yesterday that policymakers have no appetite to respond to the currency’s recent falls by hiking interest rates. Further falls in the lira are likely to lie in store and we think that it will probably take the emergence of severe strains in the banking sector before policymakers respond with aggressive policy tightening. We aren’t there yet.

23 November 2021

Emerging Europe Economics Update

Assessing the risks in Turkey’s banking sector

Turkey’s banks are generally in a good position to cope with sharp falls in the lira: they have large capital buffers to deal with a rise in non-performing loans, off-balance sheet instruments to mitigate the threat from currency mismatches on their balance sheets and rebuilt their foreign currency buffers over the past year, which should reduce the threat of default on their external debts. The key risk now stems from large FX deposits in the banking system – a flood of withdrawals would probably lead to capital controls. Drop-In: Turkey's Currency Crisis - Mapping the Endgame 23rd November, 2021 Join Senior Emerging Markets Economist Shilan Shah and Jason Tuvey, who leads our Turkish coverage, for a discussion about this latest crisis, the extent of potential EM contagion and likely paths ahead.

22 November 2021

Emerging Europe Economics Update

CBRT defies investors with rate cut, crisis risks mount

The sharp falls in the lira over the past few days clearly weren’t enough for Turkey’s central bank to stand up to President Erdogan as it pushed ahead with a 100bp cut (to 15.00%) to its one-week repo rate. While the CBRT did signal that the easing cycle would probably end in December, there is still a large risk that a self-fulfilling cycle takes hold that pushes the lira to even greater depths.

18 November 2021
↑ Back to top