Turkey’s Central Bank slams S&P over ‘hasty’ ratings downgrade

Speaking at a news conference to announce the bank’s quarterly inflation report in Ankara, Central Bank Governor Murat Çetinkaya said it was still too early to assess the impact of the abortive putsch on the Turkish economy. 

“To be able to understand the impact of the incident we have recently experienced in Turkey... A sufficient amount of time needs to have passed and a sufficient amount of data and observations need to be collected,” he said, as quoted by Reuters. 

“We think it is still too early for this. I want to say that we, as the Central Bank, find the decision recently taken by a rating agency as hasty,” he added.

Last week Standard & Poor’s cut Turkey’s credit rating deeper into junk territory, saying its political landscape had further fragmented since the attempted coup, when a faction in the military tried to overthrow the government. 

The coup attempt soon crumbled as large numbers of Turks rallied in support of democracy.

Çetinkaya said the bank’s midpoint forecast for year-end inflation was 7.5 percent for 2016 and 6 percent for 2017, both unchanged from the previous report in April.


Economic activity ‘continues to display a stable growth course’

Çetinkaya noted the nation’s economic activity continued to display a moderate, stable course of growth and that planned structural reforms would boost Turkey’s growth potential.    
  
“The Central Bank will continue to take extra measures to support financial stability if needed,” he said, as quoted by Anadolu Agency.     

His comments came almost 10 days after the bank stepped in to provide liquidity to the financial system following the deadly coup attempt on July 15.

He also said the Central Bank’s “simplification of the monetary policy,” which aimed to achieve a narrow and symmetrical corridor and provide funding via a single rate, would not have a negative impact on the performance of the local currency.      

“The simplification will increase predictability, easing the risk premium,” the governor said, as quoted by Anadolu Agency.    

 In the Quarterly Inflation Report released on July 26, the bank said: “The CB closely monitors market depth and prices and may take all measures required to maintain financial stability when necessary. The recovery in global risk appetite and the adopted measures are expected to render the spillovers from domestic uncertainty short-lived and limited.”      

The report noted that the implementation of the planned structural reforms will significantly boost the growth potential, favorably affecting the risk sentiment towards the Turkish economy.