The CBRT’s MPC meets again this week in what is shaping up to be a critical meeting on interest rates. Simsek’s reform team at the CBRT brought in after last year’s general election victory by the ruling AKP have gone further than many expected and hiked policy rates from just 8.5% to 45%. The hope was that this plus further tightening/cleaning up of the array of complex macro financial architecture introduced in the previous unorthodox regime, a $51 billion support package from the UAE, plus the credibility in the bank attributed to trusted reformers like Simsek (but also the Karahans, Akcay et al) would be enough. Initially there was a confidence boost with foreign institutional investors rewarding the team with portfolio inflows which helped the CBRT replenish much depleted FX reserves to the tune of $30 billion plus.
in the wake of elections, a hike might be interpreted as sabotage.