Hard to look beyond Turkey today. The central bank will issue its quarterly inflation report and has called an emergency policy meeting thereafter and will deliver a verdict at midnight local time. All very cloak and dagger.
The central bank, under heavy political pressure, has so far not raised interest rates but is instead burning through its reserves to defend the tumbling lira with only limited success.
It has floated the idea of “additional tightening days” when it will fund the interbank market at a higher rate, which is essentially monetary tightening by the back door. But in the throes of a full-on emerging market selloff it’s hard to see that doing the trick.
The consensus is that a sharp interest rate rise will be required to prevent a run on the currency, something Prime Minister Tayyip Erdogan has vociferously spoken out against. Erdogan’s purging of the police and judiciary in response to a corruption inquiry that has got uncomfortably close to him has unnerved investors.
The central bank said it would “take necessary policy measures for price stability” at its first such extraordinary meeting since August 2011 at the height of the euro zone debt crisis.