The Turkish Central Bank will need to hike interest rates today. The question is by how much. Currently, expectations from the market are very broad reflecting the high certaintly of the decision. That is a result of restrictive factors such as political factors and the risk of the government having to recapitalize the banks since they hold a large amount of government bonds. On the other hand, runaway inflation implies the need for aggressive policy action and a large raise in interest rates.
The range is from 6.5 to 14% on the low end and from 20 to 40% on the high end. This is a huge range of possibilities. What is likely to happen is that the policymakers will acknoledge the need for aggressive action but will lay out the reasons for a gradual hike as the more prudent approach.
Thus, our forecast is towards the lower end of a 6.5 to 14% hike.