Turkey is in the midst of a silent capital flight, with financial outflows mounting to $12 bn since the beginning of the year. In June, CPI inflation soared to 12.65% annually, with little hope of a summer relief, as cheap and easy credit fuels a consumption boom not supported by real disposable incomes. Deeply negative deposit rates in TL and rising inflation are pushing savers towards FX assets; stocks and real estate. The pressure on the currency are only contained by constant FX sales of state banks at the order of the Central Bank. In a nutshell, Turkey’s interest and exchange rates are drifting away from equilibrium. The Erdogan administration is unlikely to take steps to correct this disequilibrium. Turkey could either experience booming inflation and current account deficits by the end of the summer, or a ”sudden stop syndrome” which many ratings agencies fear.