Markets rattled in Turkey, stagflation risks in Poland

The ruling by a Turkish court which removed the opposition leader from his position has sparked capital outflows and will compound strains in the balance of payments resulting from the energy shock. With limited FX reserves, the CBRT could soon be forced to hike interest rates aggressively. Elsewhere, the worsening inflation outlook in Poland makes us increasingly inclined to pencil in monetary tightening there, beginning in July. In contrast, low inflation and the strong shekel mean the Bank of Israel is likely to cut interest rates next week.