Pressure on Turkish Central Bank head rises

ISTANBUL

Yiğit Bulut.

The Central Bank should have made a rate cut of at least 1 percent earlier this week, the president’s chief economy adviser, Yiğit Bulut, said late on Jan. 21, criticizing the state lender’s decision to only reduce the rate by 0.5 percent.

“If Central Bank Governor Erdem Başçı says he cannot do this, someone who isn't afraid of doing this should replace him,” Bulut added.

The bank lowered its main interest rate by 50 basis points, mainly due to slowing inflation, under strong political pressure for a softer monetary policy ahead of the parliamentary election in June. It cut its one-week repo rate to 7.75 percent while leaving unchanged its overnight lending rate at 11.25 percent, its primary dealers’ overnight borrowing rate at 10.75 percent, and its overnight borrowing rate at 7.50 percent.

“The Bank should have lowered the rate by 1 [percent] at least. 0.5 is nothing … Our president, [Recep Tayyip] Erdoğan, said something great to the Central Bank, noting that if it is independent, the president is also independent,” Bulut also said.

“If 52 percent of the people elected our president, and the president is the head of the state, he cannot just watch the transfer of the people’s money to the pockets of only 5,000 real and legal persons due to the decisions of an institution,” he added.

Bulut was made an adviser to Erdoğan in 2013 after making worldwide headlines when he claimed that foreign powers were attempting to kill the then-PM with telekinesis at the height of the Gezi protests.

Meanwhile, Development Minister Cevdet Yılmaz told NTV yesterday that the cabinet was not considering any change in the role of the Central Bank, while also stating that the lender should have made more rate cuts.

Speaking in Davos, Prime Minister Ahmet Davutoğlu said he had not yet spoken to Başçı but noted that the government believed further cuts would be good for the economy.

“Turkey is a democratic country. Anybody can say whatever he or she wants … I believe the decreasing trend in inflation will continue and the general outlook of the economy is good. And we think it would be beneficial to see more rate cuts,” Davutoğlu said.