Interest rate hike ends debate on Turkey's Central Bank: Albayrak

ANKARA

Turkey’s Treasury and Finance Minister Berat Albayrak has said the Central Bank’s decision to sharply raise the interest rate ended the debate on its independence.

“With the latest decision, the debate on the independence of the Central Bank is over, and from now on, there will be no reality and no retributions for this debate. These debates can be considered ill-intentioned. These types of speculations and discussions will not have any echoes in global markets,” Albayrak was quoted as saying by Sabah newspaper on Sept. 14.

The Bank raised its benchmark rate by 625 basis points to 24 percent Sept. 13 in a move that boosted the Turkish Lira and may ease investor concerns about monetary policy. This was the biggest hike in its benchmark interest rate in more than a decade.

“The Central Bank took necessary monetary policy step to fight against inflation. It also gave the signal that it would take new steps toward tightening when necessary” Albayrak said.

The decision came despite President Recep Tayyip Erdoğan repeating his opposition to high interest rates earlier in the day, saying “high inflation was a result of wrong steps by the Central Bank.”

Commenting on the rate, Erdoğan on Sept. 14 said it proved the Bank was independent as well, while repeating his own skepticism.

“Yesterday the Central Bank has carried out the very much talked about interest rate hike and did this at a very high level,” he said, addressing ruling Justice and Development Party (AKP) provincial heads in Ankara.

“They say independence, there you go independence. Now we will see the result of independence. Right now personally I am at my phase of patience. But this patience is to a certain extent. Because we can’t say OK to a lever of exploitation,” the president said.

Economic program on Sept 20

Meanwhile, Albayrak noted that now the most important step on the fiscal side was to announce the Medium-Term Program (MTP), which is the government’s three-year business plan for fighting inflation, sustainable and healthy growth and decreasing the current account deficit.

The MTP, focusing on export-led growth and a stronger domestic production, will be announced on Sept. 20, according to the minister.

“Everyone will see a program that is realistic, which identifies the current problems accurately, and which builds the right action plans. We will introduce realistic macro targets in the Medium-Term Program. We will share the steps that we will take to reach these targets,” he said, adding that the program progress can be tracked.

The Turkish minister vowed “a strong coordination and harmonization between monetary and fiscal policies,” while adding that Turkey “will see a rebalancing with a downward trend in inflation, beginning in October.”

“Turkey’s main issue is economy. The key item on the agenda of our economy team is fighting against inflation,” Albayrak said, stating that all ministries will fight against inflation and budget deficit will be brought below 2 percent.