Emerging markets strategist at Société Générale, Phoenix Kalen said on the bank’s decision that “ a credible signal to the market that they were willing to hike explicitly the benchmark repo rate, that they were addressing the deterioration in inflation expectations and continuing with the gradual shift back towards more conventional monetary policy. But clearly, we did not see that.”

The main reason for the huge depreciation of lira was heavy pressure from President Recep Tayyip Erdogan. He was a staunch opponent of high-interest rates who last year sacked the former governor, Murat Cetinkaya, following a disagreement over monetary policy.

Turkish lira reacted after the decision decreasing as much as 2.1 per cent.

Performance of TRY/USD (Source: Tradingview.com)