Turkey’s Central Bank caves on interest rates
Under fire from the government and the president, Turkey’s Central Bank has abandoned its cautious approach and moved to lower interest rates.
Exasperated with long-standing political pressure, Turkey’s Central Bank seems to have caved in, moving to meet the demands of the president and the government to lower interest rates.
At its Jan. 20 meeting, the Central Bank’s Monetary Policy Committee lowered the benchmark one-week repo rate from 8.25% to 7.75%. The cut, however, failed to satisfy President Recep Tayyip Erdogan and the government. The Central Bank remained under fire. His back to the wall, Gov. Erdem Basci broke with tradition to announce days in advance that a further cut was likely on Feb. 4.
Pressure had mounted on Basci in recent days. Erdogan, who used to often slam the Central Bank in his days as prime minister, burst out again on Jan. 16 after eight months of silence following his ascent to the presidency. “No one speaks out against the high interest rates. The Central Bank has failed to make a move [and] lower the rates. Oil prices have fallen to $45. Hey you, Central Bank, what are you waiting for? Some could now say the Central Bank is independent. I am independent, too. I’ll talk to them [the Central Bank]. This cannot go on like this,” Erdogan said.
Economy Minister Nihat Zeybekci followed up with a veiled threat showing the door to Basci. “If they complain of too much pressure, then the arbiter will change,” he said.
