The central bank of Turkey is expected to raise rates by 50-100 basis points in the monetary policy meeting scheduled this week, in contrast to a no change in the benchmark interest rate forecast revealed earlier, Commerzbank reported.

Turkey’s Economic Coordination Board met on Friday to discuss market developments, the lira sell-off, and policy options to deal with these, chaired by Prime Minister Binali Yildirim.

There was no official statement from CBT, but local media cited participating policymaker as saying that the board views the adverse lira development as externally-driven, that all policy options were evaluated and CBT will follow economic developments closely while taking measures in line with its price stability target.

"In our view, this reference to the price stability target implies that CBT may have support from AKP leadership to hike rates and break the inflation-FX spiral which is setting in," Commerzbank commented in the report.

Nevertheless, AKP leadership would never be happy with such a decision. Hence, there was also plenty of reference to ‘reforms’ which will lower inflation (presumably without the need for higher interest rates) and the need to support the real economy with credit.