Turkish stock market at record high - What's behind the unorthodox monetary policy?

Turkish stock market at record high - What's behind the unorthodox monetary policy?

According to a report by www.sueddeutsche.de, the Turkish stock market is at a record high on hopes of a turnaround in monetary policy. The Istanbul Stock Exchange's leading index, ISE 100, has risen by 5,730 points, which corresponds to a quarter of an increase in value since the Turkish presidential runoff election at the end of May. Nevertheless, calculated in US dollars, the index remains below the weakest benchmark indices at minus 18 percent over the year due to the country's high inflation.

President Recep Tayyip Erdogan has raised hopes for a positive change in monetary policy with the appointment of Hafize Gaye Erkan, a former US banker, as head of the Turkish central bank and the appointment of Mehmet Simsek, a former investment banker, as finance minister. Inflation in Turkey is close to 40 percent and the local currency, the lira, has fallen to a record low against the euro and to another low against the dollar.

Experts attribute these developments, among other things, to Erdogan's preferred low interest rate policy. Despite high inflation, he is putting pressure on the central bank to keep interest rates low. This policy has led to the devaluation of the currency and accelerated with Erdogan's re-election.

These renewed changes in Turkey's political and economic leadership could have long-term effects on the financial industry and the stock market. Investors and financial professionals will continue to have to prepare for more volatile conditions. The uncertainty surrounding Turkey's monetary and economic policies could lead to further capital outflows from the country and a reduced attractiveness of the Turkish stock market.