Turkey’s sovereign debt rating further trashed by Fitch

“Turkey’s expansionary policy mix (including deeply negative real rates) could entrench inflation at high levels, increase the exposure of public finances to exchange rate depreciation and inflation, and ultimately weigh on domestic confidence and reigniting pressure on international reserves,” Fitch said in a statement. declaration.

Turkey’s central bank began cutting interest rates under pressure from President Recep Tayyip Erdogan last year, while most emerging markets did the opposite to shield their currencies from global price pressures. The monetary authority cut its key rate by a total of 500 basis points in four meetings through December, sending risk indicators including CDS to multi-year highs.

The lira lost up to half of its value against the dollar before the government intervened in late December to stem the currency’s decline. Some of the government measures – including a lira deposit scheme that protects savers against sharp depreciations – brought a level of stability to the lira, but inflation soared to 48.7% in January, the pace of fastest increase in two decades.

S&P and Moody’s also rate Turkey’s sovereign rating undesirably high.

Sharon P. Juarez