Turkey’s CB chief signals drive for ‘simpler’ policy
ISTANBUL, April 26, (RTRS): Turkey’s new central bank governor took a cautious stance on the outlook for inflation on Tuesday, saying price stability would be his priority, and signalling his ambition for simpler and more transparent policy.
In his first news conference since taking office last week, Murat Cetinkaya stuck to his predecessor’s inflation outlook, days after trimming the top end of the bank’s rate “corridor” in his debut as governor last week.
Cetinkaya, the first Islamic finance specialist to hold the position of central bank governor in Turkey, remains an unknown quantity for investors, who fear he will buckle to political pressure and cut rates further, even as inflation remains above target.
“We are still in wait-and-see mode with Cetinkaya, giving him the benefit of the doubt,” said Tim Ash, a strategist at Nomura International.
“At the moment, the global and domestic economic backdrop is helpful ... which leaves scope for (central bank) rates cuts, pleasing Cetinkaya’s ultimate political masters. So thus far he has not been tested.”
In its quarterly inflation report on Tuesday, the bank left its mid-point expectation for year-end inflation unchanged at 7.5 percent, defying expectations of some economists who had forecast a reduction of 50 basis points given lower food price inflation.
The lira currency firmed to 2.8305 after his comments, from the previous session’s close of 2.8440.
President Tayyip Erdogan, who favours consumption-led growth, has repeatedly railed against high interest rates, equating them with treason. Erdogan says that interest rates cause inflation, a stance at odds with orthodox economics.
Turkey’s central bank has missed its 5 percent inflation target for the last five years.
“It is our wish that the central bank will bring inflation down to low single-digits to boost credibility and pave the way for investments,” Deputy Prime Minister Mehmet Simsek said later on Tuesday.