Poland overheating fears, Turkey crisis rumbles on

Concerns that Poland's economy is overheating will have only been reinforced by figures this week showing a surge in wage growth and a sharp widening of the current account deficit in October. Loose fiscal policy next year risks adding fuel to the fire, but aggressive monetary tightening should help to take some steam out of demand and inflation. Meanwhile, the decision by Turkey's central bank to lower interest rates by 100bp this week has deepened the lira's woes - it is now down by 55% against the dollar year-to-date. Interest rate hikes are clearly off the table and it's more likely that policymakers will resort to capital controls if strains in the banking sector intensify. – This will be the last Economics Weekly for 2021. The next Weekly will be sent on Friday 7th Jan. 2022 –