Currency fluctuations stir inflation: Turkish Central Bank Governor Başçı

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Turkey's central bank governor Erdem Başçı. REUTERS Photo

Turkish Central Bank Governor Erdem Başçı defended the Bank’s decision to keep interest rates high on May 26, citing high inflation and the low currency rate as continuing risks.

Making a presentation at ECB Forum on Central Banking in Portugal, Başçı said efforts to combat inflation in Turkey were still ongoing and currency rate fluctuations were one of the biggest causes of inflation.

 “The interest dichotomy requires macroprudential measures [for balance and stability],” he added.

“Currency rate stability needs harmony with low global interest rates, whereas loan stability needs domestic interest rates higher than global rates. The solution is low interest rates and a tight macroprudential policy,” Başçı also said, recalling that macroprudential measures were tightened in the post-Lehman recovery period.