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All Signs Point to Rate Hikes in Turkey

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In an effort to contain the steep decline in the lira, Turkey’s central bank is hinting at tighten monetary policy through interest rate hikes. The lira is strengthening against the dollar on expectations that the central bank will aggressively increase its overnight lending rate. Economists are forecasting a raise of two to three percentage points in the current 7.75% overnight lending rate. Moreover, the central bank has a negative outlook on Turkey’s economic. For example, expectations for year-end inflation were revised upward by 1.3 percentage points. All signs indicate that the central bank will hike interest rates to combat inflation and provide stability to the lira. Just like India's move, but this time it won't be a surprise.