Turkey may finally raise rates as FX defenses run thin

Running out of policy options, Turkey may resort to an interest rate hike after all: With Hormuz disruptions continuing and energy bills not expected to stabilize anytime in 2026, JP Morgan now sees Turkey raising interest rates by 300 bps to 40% ahead of the monetary policy committee meeting on 11 June.

Forced to swallow the bitter pill: Turkey focused its wartime response on propping up the TRY, drawing from gold and foreign currency reserves and selling off US Treasuries. The goal was to fend off inflation without raising interest rates, which could slow the economy and hike debt costs. That response would have worked only if the war were short-lived.

MEANWHILE- Our friends at London-based EFC now think that Egypt may have room to resume cutting rates later this year, saying in a note to clients that in comparison with Pakistan and Philippines — which, like Egypt, have been grappling with rising headline inflation — ”economic policy has been the most foreign-investor friendly, with a big EGP move in March creating a solid basis for inflows when risk appetite resumes.”