Turkey edged closer yet to a full-blown financial meltdown.

Ahead of a much-anticipated public address by President Recep Tayyip Erdogan, the lira plunged more than 11 per cent to a fresh record, headed for its worst week since 2001. Government bonds slumped, sending benchmark yields to an all-time high amid falling investor confidence in the authorities’ ability to stem the market rout.

As Erdogan speaks later in the day, investors will be looking for any sign that he is willing to ease tensions with the U.S. sparked by the detention of an American pastor. The worry is that Turkey will face further sanctions if he is not released. The market will also watch whether the president will play down his long-held distaste for higher borrowing costs that many investors say is standing in the way of policy efforts to anchor the nation’s assets.

“Seems like a complete crash, so they need to act now,” said Morten Lund, a strategist at Nordea Bank AB in Copenhagen. “The lira will keep falling if they don’t hike rates today.”

The turmoil threatens to scare away the foreign capital that Turkey depends on to finance its large external deficit, and hampers companies’ ability to repay foreign-currency loans. The government cut its 2018 growth target Thursday to less than 4 per cent, from 5.5 per cent, a sign that it is willing to accept a more moderate pace of expansion in an effort to rebalance the economy.

Treasury and Finance Minister Berat Albayrak is due to hold a press conference this afternoon.

The revisions are unlikely to be enough “to lead to a recovery in markets,” said Erkin Isik, a strategist at Turk Ekonomi Bankasi AS. “If the currency remains at current levels, headline inflation is likely to approach 18 per cent year-over-year by September. As a result, current policy rate at 17.75 per cent is not tight enough.”

The lira tumbled as much as 11.2 per cent to a fresh record of 6.3005 per dollar, while the 10-year bond yield jumped 93 basis points to 20.67 per cent.

The market rout on Friday was compounded by a Financial Times report that said the European Central Bank has grown concerned about the exposure of some euro-zone banks to Turkish assets following the lira’s plunge.

“The key to any hope of Turkish stability is the ability for banks to roll over syndicated loans -- so far, that’s been absolutely fine,” said Paul McNamara, a money-manager at GAM UK in London. “I think the FT thing about the ECB being worried about Turkey exposures is a huge new factor.”