Turkey is by now accustomed to its path of collapse, and the country continues to move along it. Global markets, meanwhile, are breaking out in a sweat over the Fed tightening and interwoven political and social crises. November just might be a rather ‘exciting’ month this year.

On September 21, the Fed hiked its policy rate by another 75bp to 3.00-3.25%. The US state central bank governors now expect the rate to reach 4.25-4.50% in 2022, versus the expectation of 3.25-3.50% they gave in July.

The stress generated by the global tightening is binding the hands and feet of the world. Political crises, the energy crisis, the food crisis, the Ukraine war, the US-China cold war and many intersecting social crises are the current norm on the planet.

November could see some grave shake-ups on the financial markets. The market currently expects another 75bp hike by the Fed to be brought in on November 2.

Since September 21, the chorus that sings “The lira’s at an all-time low” has again been on stage. Since September 28, the USD/TRY has been testing the 18.60-level.

Different data sources provide different figures for where the pair got to last December 20. The market broke down on that day. The USD/TRY jumped around 15-20% d/d from the 13s to somewhere in the 18s.

Investing.com provided a figure of 18.8760 for December 20. However, it later changed the figure to 18.3674. So, according to current figures provided by the website, the USD/TRY has been breaking records again since September 19.

Soon, however, the USD/TRY will put an end to the confusion by rising to record levels certainly unchallenged by the historical record.

Turkey’s five-year credit default swaps (CDS) remain above the 700-level, while the yield on the Turkish government’s 10-year eurobonds remains above the 11% level.

Lira costs in the London offshore swap market have been booming again, a sign that Turkish banks are cutting the lira supply in the market to prevent foreigners from shorting lira.

Non-capital controls, first introduced in 2018, have been extended over time. A sharp restriction on capital flows seems beyond the government’s options as it might put another crack in the edifice.

Some new instrument such as a CPI-indexed bond for individuals, which would be announced with the burning of some more huge amounts of FX and a media campaign suggesting that Erdogan is wrestling the dollar to the ground, can be expected.

Turkey again cut its policy rate by 100bp to 12%. Turkey’s president, Recep Tayyip Erdogan, wants Turkey’s policy rate to stand in the single digits by end-2022, he said on September 28 during a televised interview.

Turkey’s monetary policy committee (MPC) has three more meetings scheduled for the remainder of 2022. They are to take place on October 20, November 24 and December 22.

According to Erdogan’s guidance, the committee can be expected to deliver 100bp cuts at each meeting.

Turkey’s policy rate remains idle on the sidelines while the government controls the monetary conditions via macroprudential measures and non-capital controls.

As a result of the government sticks at the bankers’ backs, loan costs and loan growth rates are simultaneously declining at the moment. The government calls this “targeted lending,” which critics contend means providing some “lucky” economic actors with cheap loans, while leaving others with no financing option.

“Targeted” can be taken to make no sense when it comes to the lira supply. There is enough lira and there are perfectly suitable global conditions for another major-scale lira crash.

It is not possible to estimate the exact timing of any crash ahead. The government will burn through whatever it can in the FX market before letting the currency plunge into the abyss.

In August, there were some $15bn-20bn of inflows into the country. In September, nothing much was observed. Erdogan’s hunt for FX among the “friendly countries,” said to include Russia, the UAE, Saudi Arabia and Qatar, continues.

Black money has been welcome since 2008 under “wealth amnesty” schemes. All options are tested.

Turkey’s trade deficit broke a fresh record with $11.3bn in August.

S&P Global Ratings downgraded Turkey’s sovereign credit rating by one notch to B/Stable, five notches below investment grade, from B+/Negative. More downgrades are on the way.

The finance ministry sold $2.5bn worth of sukuk papers at 9.758% coupon.