Turkey bears watching closely. The solution to the continuing selloff in the Turkish lira—which Friday hit a fresh record low of 2.33 to the dollar—seems clear: the Central Bank of Turkey needs to raise interest
rates.
But political turmoil means it is unwilling to do so;its interventions in support of the lira are inadequate.
In the meantime this could cause larger problems. Turkish companies have large foreign-debt exposures, and the lira's slide could cause balance-sheet strains.
That suggests that the central bank will ultimately have to hike rates to avoid a bigger crisis. But the situation could get much more uncomfortable before that happens.
Read more : Global Economy Turmoil: Emerging Mix Rattles Nervous Markets - by Richard Barley
But political turmoil means it is unwilling to do so;its interventions in support of the lira are inadequate.
In the meantime this could cause larger problems. Turkish companies have large foreign-debt exposures, and the lira's slide could cause balance-sheet strains.
That suggests that the central bank will ultimately have to hike rates to avoid a bigger crisis. But the situation could get much more uncomfortable before that happens.
Read more : Global Economy Turmoil: Emerging Mix Rattles Nervous Markets - by Richard Barley
