Turkey defends lira, lifts rates amid EM currency pressure

Turkey's central bank responds to pressure on the lira (which has hit a record low against the euro amid a broad-based slide in EM currencies) with a 50 basis point surprise rate hike.

The overnight lending rate is now 7.75% — the overnight borrowing rate remains at 3.5%, one-week repo still at 4.5%, primary dealer repo still at 6.75%. (PR)

The market seems to be taking a skeptical view of the central bank's implicit claim that the move is in response to inflation: "The explanation that this rise is primarily about inflation rather than the exchange rate is not credible in the eyes of the market and the markets will be testing the central bank in the days ahead," one Istanbul-based analyst tells FT.

Turkish stocks (TUR -3.9%) are down 25% since May.

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