Battered by the Lira, Turkish Firms Face Catch-22 on Rates

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An interest rate hike by Turkey’s central bank on Thursday might just be the lesser of two evils for the country’s beleaguered companies, Bloomberg News reported. On the one hand, a steep rate increase could stem the slide in the lira that has boosted dollar-debt costs by more than 40 percent this year. On the other, pausing would spare the already bruised balance sheets of companies, which have had to contend with a near doubling in local borrowing costs. “Unfortunately, there is only a bad scenario and a worse scenario for the Turkish corporate sector,” said Inan Demir, an emerging-markets economist at Nomura International Plc in London. “If the central bank delivers a convincing rate hike, the currency will stabilize. The net effect of a strong rate hike is more positive for companies.” The lira’s plunge against the dollar in 2018, second only to Argentina’s peso, means policy makers have little choice. Read more.