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June 8, 2018 www.intellinews.com I Page 4
As of June 7, 17 days before the crucial elections, it seems the MPC may have secured a strong buffer against any further market fluctuations, especially in the FX markets, which could sub- stantially affect voting behaviour. However, in the medium term, the impact of high interest rates on the growth outlook for the Turkish economy will have to be assessed.
Since April 24, the MPC has delivered rate rises that add up to a combined 500-bp increase in its main funding rate.
The moves will help address concerns that Turkey is not taking enough action to tackle economic
imbalances that include one of the worst current account deficits in the world and a widening budget deficit. But the CBRT is also joining a trend now being seen in other key emerging markets. Central banks in these markets have been hiking interest rates with more vigour
than investors expected, partly because their economies need protection against a rising dollar and capital outflows prompted by the US Fed’s own tightening. India’s central bank this week raised its benchmark for the first time since 2014, joining peers in Indonesia, Mexico and Argentina. Brazil is now also coming under pressure from investors to push up its rates.