Emerging Europe Economics

Emerging Europe Economics Update

23 May, 2018

Lira collapse to trigger rate hikes

The plunge in the Turkish lira over the past few days has been steeper than that which triggered abrupt monetary tightening in 2014 and 2017. We expect the MPC to hold an interim meeting over the coming days to raise interest rates by at least 200bp. If policymakers refrain from tightening monetary policy, the risk of a disorderly adjustment and a sharp economic downturn (possibly recession) will mount.

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