Lira sell-off adds pressure on the CBRT to respond

The sharp fall in the Turkish lira this week appears to be pushing policymakers towards monetary tightening, but we're not convinced that they will placate financial markets. In the past, it has tended to take much larger falls in the currency to trigger significant increases in interest rates. Meanwhile, activity figures in Central and Eastern Europe for June provided further evidence that activity continued to recover strongly as lockdown measures were lifted.