Turkish Lira slumps more than a percent as central bank hold rates

Turkey's central bank has kept interest rates steady today, surprising market as popular expectations was for at least another hike. Inflation is already above central banks' policy rates. Inflation is currently at 8.1%, while central bank rate is at 7.5%.

Today's stance poses further doubt that central bank might be acting on political will, rather than to fight inflation. Policy increase has been immense unpopular with Turkey's ruling party, especially president Erdogan. That hurts central bank credibility.

Country is suffering through severe stagflation. While growth is at 1.3%, unemployment rate is at 10.3% and inflation rate at 8.1%. Though government debt to GDP relatively small at 33%, corporate sector debt is particularly worrying.

Non-financial corporate debt is now standing at $398 billion, of which 33% are denominated in US Dollar.

Turkish Lira, snapped its five day rally against Dollar, by falling more than 1.1% today. Lira is currently trading at 2.943 per Dollar, down 27% in last 12 months.