Turkish Central Bank defends tight policy ahead of key report

ANKARA

Turkish Central Bank Governor Erdem Başçı. DAILY NEWS Photo

Monetary tightening works aim to control inflation and reduce currency rates, Turkish Central Bank Governor Erdem Başçı said ahead of the unveiling of the Bank’s highly-anticipated inflation report on July 23, again defending his Bank’s policies against government criticism.

Making a presentation to members of Parliament, Başçı said monetary tightening measures were yielding expected results for the Turkish economy.

“A front-loaded and strong monetary tightening has been introduced with the aim of preventing deterioration in inflation expectations and pricing behavior,” he said, stressing that this had proved efficient at stopping a rapid loss of value in the lira, as well as in the battle against inflation.

The governor also said macroprudential measures introduced by the country’s banking watchdog enabled rates to fall by curbing the demand for loans.

Başçı’s presentation came a day before the announcement of the Central Bank’s third quarterly inflation report.

The inflation report, released four times every year, is seen as a guide for the Bank’s future policies, particularly regarding interest rates.

The Bank has been under fire from the government, led by Prime Miniser Recep Tayyip Erdoğan, who repeatedly slams it for “jeopardizing growth and keeping interest rates high.”

The Bank has shaved its benchmark interest rate by 1.75 points over the past three months, but Erdoğan remains unsatisfied, as his call for a large and immediate reduction has been shrugged off by the Bank’s “gradual and measured reduction” policy.