The latest surge in European wholesale gas and electricity prices has pushed governments to step up policy support to households and shore up energy supplies ahead of winter. Many economies are already heading into recession and these downturns will be much deeper if energy has to be rationed. Elsewhere, tweaks to banks' reserve requirements in Turkey effectively forces them to hold more sovereign bonds and prompted a sharp fall in local currency government bond yields. In an environment of high inflation, this amounts to financial repression that will support the public debt dynamics.
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