S&P lowers Turkey local currency sovereign rating one notch from BBB to BBB- (lowest level of investment grade); outlook Negative - affirms foreign currency sovereign ratings at BB+The lowering of the local currency sovereign credit ratings on Turkey reflects what we consider to be increasing curbs on the operational independence of Turkey's central bank, which in our opinion have made it more challenging for the monetary authority to credibly fulfill its price stability mandate and to dampen the impact of exchange rate volatility on the economy's growth prospects. Another consequence of rising currency volatility, which reflects a less transparent monetary policy, is the re-dollarization of the financial sector's deposit base. Overall, we now consider that the challenged credibility of the central bank, including a weakened monetary transmission channel, has diminished the status of the Turkish lira as a reliable transactional currency; we think this poses greater risks to the refinancing of Turkey's considerable stock of external debt. While we consider that Turkey's relatively deep capital markets benefit its monetary flexibility, we view the complex monetary framework--with multiple interest rates and an unusually broad interest rate corridor--as relatively ineffective given the high pass-through of exchange rate depreciation into headline inflation.