Last week, the Monetary Policy Committee (MPC) raised its key policy one-week repo rate by 625bp to 24% at its regularly scheduled meeting on 13 September, defying President Erdogan’s calls for lower rates. The hike was larger than most analysts had expected and the TRY initially gained about +4% vs. the USD. Meanwhile, however, those gains have largely disappeared again. In order to regain investor sentiment on a sustained basis and stop the ongoing currency crisis from further deepening, monetary tightening needs to be accompanied by decisive fiscal tightening, at least. Also last week, President Erdogan issued a decree curtailing the use of foreign currencies in domestic transactions. Contracts will have to be converted to TRY within 30 days. Details have to be revealed yet, but the decree has caused confusion and will likely adversely affect thousands of companies whose contracts are currently priced in USD or EUR, including many government contracts in construction activities. Especially domestic market-oriented firms which have large-scale FX-denominated debt will face difficulties.