Türkiye: Policy discipline offsets political noise – HSBC

HSBC Asset Management notes that political uncertainty and higher Oil prices have added volatility to Turkish assets and pressured reserves. Yet the MSCI Türkiye Index has held up, supported by healthy reserves and a managed Lira float. The central bank’s orthodox stance since 2023, focused on high rates to tame inflation, is seen as a key anchor for market resilience.

Lira support and orthodoxy aid resilience

"Recent domestic political uncertainty in Türkiye has injected some volatility into the country’s asset markets. Meanwhile, conflict in the Middle East and the associated rise in oil prices have pressured reserves, given that Türkiye is a big net oil importer. However, the MSCI Türkiye Index has been performing well."

"This is a good example of how EM economies are proving increasingly resilient. In the case of Türkiye, this reflects two main factors."

"First, helped by the surge in gold prices in recent years, international reserves remain sufficiently healthy to keep the managed float of the lira alive. This limits the lira’s depreciation."

"Second, policymakers have been disciplined. Following a pivot to economic orthodoxy in May 2023, Türkiye’s central bank (CBRT) has pursued policies focused on taming inflation through high interest rates, unperturbed by domestic political developments."