(Bloomberg) -- Turkey’s top policymakers will meet investors in New York, seeking to persuade them to restart buying domestic assets and that a newly-mainstream monetary strategy is here to stay.

The event, set to be held Thursday at the headquarters of JPMorgan Chase & Co., is the first such gathering organized by the central bank since Turkish President Recep Tayyip Erdogan overhauled his economic team after being reelected in May. The change of tack was an attempt to curb soaring inflation and revive foreign interest following years of unorthodox policies that caused investors to flee Turkish markets.

Finance Minister Mehmet Simsek, appointed alongside central bank Governor Hafize Gaye Erkan in June as part of that shakeup, is joining virtually. The event, which Erkan will address in person, meant to instill more confidence in investors, many of who remain unsure the switch is set in stone. Erdogan has long railed against high interest rates and sacked monetary chiefs he deemed too hawkish.

Investors have approved of Erkan’s monetary tightening, which has lifted Turkey’s main interest rate to 42.5%. But many challenges remain and the lira weakened to 30 per dollar for the first time ahead of the event. JPMorgan’s own analysts said on Thursday they expect the currency to fall to 36 by the end of 2024, further than their previous forecast of 34.

Some of Turkey’s regulations are still complicating the sales pitch from Erkan and Simsek — both of who formerly held senior positions on Wall Street. Restrictions in the offshore lira-swaps market, originally designed to deter short sellers, hinder investors’ ability to protect their exposure to Turkey.

“The challenge right now is that the cost of hedging the currency risk is very high, around 40%,” said Grant Webster, a portfolio manager and co-head of emerging markets at Ninety One in London. “Investors need to take a long-term view, which is not easy in Turkey given the recent history of policy missteps.”

Still, Turkey now has the highest local-currency yields among major developing nations, according to the Bloomberg Emerging Markets Local Currency Government Index, which tracks 18 countries including China, Brazil, Mexico and South Africa.

Erkan has said this may be the most optimal time to enter the Turkish debt market, citing plans for a more “moderate” policy environment to come.

Read more: Turkey Keeps Investors on Hold as Swaps Controls to Stay for Now

Nagging Doubts

Investors have nagging doubts about how long a truce between Erdogan and markets will remain in place, according to Webster. A similar episode in 2020 — when Erdogan appointed a technocrat central bank governor after years of unconventional policies — lasted only four months.

There is “tremendous” confidence in the central bank and Finance Ministry as they are currently set up, he said. “The challenge remains how long they remain in their posts — investors have been burned in the past.”

Erdogan has previously championed cheap credit to boost growth and his support around the time of elections, and a local vote is scheduled for March. He’s said he has “full confidence” in the economic team.

Even so, Brendan McKenna, an emerging markets economist and foreign-exchange strategist at Wells Fargo Securities LLC, said a show of support for even higher rates may shore up confidence.

“Real rates are still deep in negative territory and not high enough to reverse the current inflation trend,” he said. “Not tightening further also risks backtracking on credibility, which can result in further lira depreciation and push inflation even higher.”

Inflation accelerated to 65% in December and the central bank sees it rising above 70% in coming months. The overall consensus among economists is that the bank will raise rates to 45% in January, marking the end of its tightening cycle. 

Erkan has argued that investors should focus not on current inflation, but the central bank’s projection that it will slow to 36% by the end of the year.

In a note, JPMorgan analysts including Fatih Akcelik said bond investors should wait for either lira yields to rise or for inflation risks to decrease.

Read More: Turkey’s Inflation Ends Year Near 65% With Peak Months Away

“For foreigners to return they need to see patience, because this is going to take a long time to unwind,” said Ninety One’s Webster. “It’s not going to be painless.”

--With assistance from Ugur Yilmaz and Inci Ozbek.

(Updates with lira move and JPMorgan report.)

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