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Wednesday, January 29

29th Jan - Turkey hikes rates



Was the low interest rate a problem for Turkey – No.


Was the problem a negative current account, high inflation, corrupted governance and inefficient economy – Yes.

Would the easiest way to reverse the current account balance have been to let the lira float weaker up to the equilibrium point – Yes

Will the interest rate hike attract hot money-flows to return to Turkey – Yes

Will the new hot money be even more fickle than the previous allotments – Yes.

Will the interest rate hike improve the real economy – No

Do I now feel that everything in Turkey is fine and problems are solved – No.

Does this remind me of 1992 when FX stability was deemed more important than everything else – Yes.

Will this do anything but force other countries suffering from outbound hot money flows to raise interest rates or introduce capital controls – No.



Turkey Hikes Overnight Rate By 4.25% To 12%, Blows Away Expectations – ZH

World Markets React To Turkey's 425bps Rate Hike – ZH

SocGen's Exuberant Response To The Turkish Action –ZH
"Governor Basci, You Have Avoided A Domino Crisis In EM"

Turkey’s Central Bank Declares a Shock-and-Awe Rate Hike – WSJ

Turkey hikes, aggressively – alphaville / FT

Turkish central bank makes massive rate hikes to stem lira fall – Reuters

Turkey More Than Doubles Interest Rate in Emergency Move to Bolster Lira – BB

Turkey’s Continental Divide – BB

Yen Slips With Gold as Turkey Rate Rise Lifts Asia Stocks – BB