It is commendable that CBT wants to push ahead with rolling back capital controls, even as the Lira is proving difficult to support. These reforms will have the effect of relaxing capital controls and exposing the TRY further. 

Granted that CBT wants to use an outright higher interest rate to stabilise the currency, but so far after two rate hikes, the day-to-day pattern of currency movement still suggests continuous FX interventions. This raises question marks about how successful CBT will be in making this transition to less capital controls. The entire challenge arises, of course, because markets cannot be sure of what President Tayyip Erdogan is thinking at present and whether or not CBT’s latest measures can be assumed to be permanent or just temporary.