With the policy rate at 17.75 per cent this now takes the forwardlooking ex ante real policy rate in Turkey to well over 5 per cent. This additional risk premium is very adequate for a country with Turkey’s metrics and is well above the emerging market average and other notable bellwether emerging markets countries with a very tight monetary policy such as Russia and Mexico. Turkey still has many challenges and is in need of deep structural reform on several fronts. However, this move will go a long way to restoring investor confidence in Turkey’s ability to stay ahead of the curve. Ideally, the action should be coupled with a commitment to maintaining a tight fiscal policy anchor, although this will remain uncertain until after the election results are known. Despite the move, the exogenous backdrop for Turkey and emerging markets as a whole remained challenging given the recent recovery in the U.S. dollar and continued rise in U.S. yields. With this in mind, we feel the best value in Turkish sovereign debt is on the external currency side, where in our view Turkey is mispriced relative to other BB rated emerging market sovereigns. Turkey’s fiscal balance and gross sovereign debt-to-GDP is also moderate compared to many of its peers, while its long-standing ability and willingness to repay its external debt remains in place.