Iranian conflict raises inflation + political crisis suppresses the lira Turkish rate hike expectations heat up in June

According to the Smart Finance APP, investors are increasing their bets on the Turkish central bank raising interest rates, as rising energy costs have kept inflation high and political crises are putting pressure on the lira. The interbank market is currently expecting the Turkish Monetary Policy Committee to raise interest rates at the meeting on June 11th. Last Friday, the overnight index lira swap rate surged by about 105 basis points, implying a financing rate of about 41.75%. In comparison, the Turkish central bank's one-week repo rate is 37%, while the actual average financing cost is 40%.