Too little, too late?

Desperation is rising in Turkey’s banking sector following months of escalating political and financial instability. Benchmark interest rates have been hiked 10 percentage points so far this year to over 17%, making it much more expensive for companies and families to service their debt. But even that hasn’t stopped the Turkish Lira from plunging almost 25% since March.

“Turkey is going through its first currency crisis of the floating era,” explained Dani Rodik, a Turkish economist and professor at Harvard University. “All the previous ones were when the rate was fixed or managed, and hence unfolded much more quickly. This one is stretched over time, and the government prefers to ignore it.”

The latest spark of concern was the U.S. government’s decision to declare sanctions against two Turkish cabinet ministers over the detention of an American pastor. The Trump administration said it was also reviewing Turkey’s…