“Lira-isation” drive deepens, MNB’s hawkish stance

Turkish policymakers deepened their "lira-isation" drive this week by increasing the incentive for firms to convert their FX earnings into lira, but we're not convinced that the policy changes will be successful. The longer the current unorthodox policy experiment continues in Turkey, the greater the risk of a sudden fall in the currency and strains emerging in the economy. Elsewhere, the Hungarian forint appreciated this week as investors interpreted the central bank’s meeting on Tuesday as a relatively hawkish one. Even so, there was a slight dovish change in guidance and we think the central bank will start to ease monetary conditions later this year.