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Economists at Barclays noted that the Turkish lira is still under that level, which could prompt the central bank to consider a rate hike.

Key quotes (via Bloomberg)

“Unless the dollar-lira pair exceeds 7.50, Turkey’s central bank will “keep its policy rates stable and manage the volatility by moving within the corridor and reducing TRY liquidity in the system.”

Turkey’s policy rate to remain on hold at 8.25% for the rest of the year; “however, the risks are clearly to the upside following the recent volatility” in the lira.

The main factors behind the lira’s volatility are local demand for hard currency and a “relatively muted reaction” from the central bank in terms of foreign-exchange sales.

Even if the central bank shifts to using the Late Liquidity Window to fund all lending at 11.25%, Barclays says it “may not be sufficient enough to limit locals’ FX demand, ceteris paribus”

Policy makers will likely raise the blended funding rates toward 11.25% while evaluating the effect of their measures over the next few days; the central bank is set to continue to “intervene verbally if needed” until the next meeting of the Monetary Policy Committee on Aug. 20.”