The Turkish lira crisis is by no means over. Today, the lira at the start of the trading day plunged further and has recovered somewhat since then.  The crisis will not be over until the government takes some drastic steps to curb inflation and President Erdogan stops his Interference at the central bank and the economy in general.

The markets expect controls on currency trading and on capital movements. A major hike in interest rates is unlikely since Turkey’s annual inflation rate already stands at over 17.75%. Furthermore, President Erdogan is dead set against a further hike in rates.

It is important to note that it is the height of the tourist season and hordes of foreigners are flocking to Turkish beach resorts along the Mediterranean and the Black sea. Even though Europe is in the midst of an unprecedented heat wave, Turkey remains a favored vacation destination. The income from foreign travelers coming to Turkey should help overcome some of the external accounts deficits.

So far nothing of substance has happened. The IMF has not yet stepped in nor has the ECB. A delegation of Turkish officials has traveled to Washington without tangible results. But then again it is early days and talks with European leaders and Washington are ongoing.

It looks as though Erdogan will be able to weather this storm and survive. He just won an election in June, one that gave him significantly more powers. He is effectively the head of the central bank and he controls all avenues of market activity. Moreover, he overcame a coup attempt two years ago and another one is unlikely at this point. His fight with the Trump administration is at a standstill and is unlikely to turn into a more serious battle. His fight with the European nations is also going nowhere. Turkey is an important member of NATO, which hopefully will curtail some of the sharp rhetoric from both sides.