Erdogan says some irrational things
So analysts are peering back through the archives to gauge the likelihood of Erdogan being persuaded to change his mind. Credit Suisse's Redmun and Sai found two quotes from Erdogan published in mid-May, in which the president expressed unorthodox views about economics.
At a meeting in Chatham House, London, Erdogan told attendees to "please learn" that low interest rates deliver low inflation, according to the Financial Times.
Also in May, Erdogan spoke to reporters at Bloomberg. He said:
"When the people fall into difficulties because of monetary policies, who are they going to hold accountable? They'll hold the president accountable. Since they'll ask the president about it, we have to give off the image of a president who's influential on monetary policies."
He also confirmed that he was going to have a role setting interest rates himself, confirming his central bank's monetary independence was over.
'How can you invest in a country when the guy doesn't believe in basic interest rate theory?'
And he told Bloomberg staff at a lunch that he was resolutely opposed to raising rates.
"How can you invest in a country when the guy doesn't believe in basic interest rate theory?" The FT reported one attendee as saying. "Turkey almost looks uninvestible."
Then in June, Erdogan made an infamous election speech to business leaders in Ankara, in which he said interest rates were "evil" (emphasis ours):
"If my people say continue on this path in the elections, I say I will emerge with victory in the fight against this curse of interest rates ... Because my belief is: interest rates are the mother and father of all evil."
Turkey could be heading into technical bankruptcy
Tilmann Kolb of UBS wrote in a note four days ago that Turkey could be headed into "a full-fledged balance-of-payments crisis." In plain English, that would mean Turkey's currency becomes so devalued it becomes unable to pay its debts or buy services from abroad - technical bankruptcy for the entire country.
"At this point, we are not sure if the policymakers have a detailed plan for coordination or disagree on the measures, or if communication and implementation are being blocked at the highest level," Kolb wrote. "Any of these is worrying given the urgent need to act, in our view."
He added: "The crisis looks likely to deepen at this point, and so does a further depreciation of the lira. We think the risks are skewed toward a further dollarization of the Turkish economy, and possibly a full-fledged balance-of-payments crisis, the introduction of capital controls, or an involvement of the IMF. While the window for a rebound of the lira has not fully closed, we continue to advise investors to reduce exposure to the currency."