Turmoil in Turkish Markets: Lira Crisis and Political Tensions Spur Financial Instability

Turkish stocks and bonds experienced a significant downturn following the detention of Istanbul's mayor, a key political rival to President Erdogan. This sparked a market-free fall, protests, and a volatile lira, forcing the central bank to intervene. The political tension raises economic uncertainty and halts anticipated monetary policy changes.

Turkish financial markets faced a major upheaval as stocks and bonds plummeted, triggered by the detention of a prominent political figure on Wednesday. The Istanbul mayor's arrest, seen as President Erdogan's main political rival, has sparked accusations of political maneuvering and protests across the nation.

The Borsa Istanbul experienced a dramatic decline, activating circuit breakers twice on Friday, while the Turkish lira fluctuated sharply against the U.S. dollar. In response, the central bank intervened by selling foreign exchange reserves and adjusting policy rates to curb the financial fallout.

These events have cast doubt on the Turkish economy's stability, leading to an abrupt pause in anticipated rate cuts by the central bank, and prompting fears of increased borrowing costs and economic uncertainty.

(With inputs from agencies.)