This is because higher interest rates set by the U.S. and a resulting stronger dollar spell trouble for emerging markets like Turkey that import their energy supplies in dollars and have large dollar-denominated debts, and thus will have to pay more for them. 

The market rout prompted margin calls, which is when brokerages require investors to add money into their positions to buffer the losses in stocks they bought on “margin,” or borrowed money. That caused the selling to spiral further, until Turkey’s main clearing house, Takasbank, announced on Tuesday an easing of requirements for the collateral payments on margin trading. 

Banking stocks and the Borsa as a whole rebounded slightly on the news, with the exchange up 2.43% since Monday’s close as of 2:00 p.m. in Istanbul. The Borsa Istanbul is still up 73.86% year-to-date.

But analysts say the exchange’s positive performance is not in line with Turkey’s economic reality, as they look ahead to the Turkish central bank’s interest rate decision on Thursday. 

Faced with inflation at just over 80%, Turkey shocked markets in August with an interest rate cut of 100 basis points to 13% – sticking to President Recep Tayyip Erdogan’s staunch belief that interest rates will only increase inflation, counter to widely held economic principles. This is all taking place at a time when much of the world is tightening monetary policy to combat soaring inflation. 

Country watchers are predicting another cut, or at most a hold, which likely means more trouble for the Turkish lira and for Turks’ cost of living. 

Economists at London-based Capital Economics predict a 100 basis-point rate cut.