Turkish PM Erdogan slams C.Bank over interest rates

Data on Tuesday showed Turkish inflation rose less than expected in May, but the annual increase stayed above the central bank's forecast for the end of the year, bolstering its case for keeping monetary policy tight.

Turkish PM Erdogan slams C.Bank over interest rates

World Bulletin / News Desk

Turkish Prime Minister Tayyip Erdogan, who has criticised the central bank for not cutting interest rates enough, said he did not accept Governor Erdem Basci's approach on rates and hoped the bank would act immediately to resolve the issue.

Speaking to reporters a day after Basci briefed the cabinet on central bank policy, Erdogan said the latest data showed that inflation was not falling.

"These are routine presentations but I do not find his approach concerning interest rates at all positive and I do not accept it," Erdogan said, asserting that high interest rates were the cause of high inflation. "I hope that new steps are taken immediately and this issue is resolved," he said.

Data on Tuesday showed Turkish inflation rose less than expected in May, but the annual increase stayed above the central bank's forecast for the end of the year, bolstering its case for keeping monetary policy tight.

The bank cut interest rates for the first time in a year last month, despite high inflation, after calls for a rate cut from Erdogan, who is eager to maintain economic growth ahead of an August presidential election and parliamentary polls in 2015.

Erdogan said the bank's 50-basis-point cut in its one-week repo rate, the main rate at which it funds the market, was not enough, renewing concern about political interference in monetary policy. 

DEPUTY PM CALLS FOR CENTRAL BANK INDEPENDENCE 

Turkey's deputy prime minister reaffirmed Monday that the government, despite holding that lower interest rates could attract more foreign investments, had no intention to intervene in the Central Bank's policies.

"As you all know, the independence of the Central Bank is one of the basic principles mentioned in the founding manifesto of our party. We have neither deviated from this principle so far, nor we have any intentions to do so in the future," Arinc said.

On May 22, the bank cut its main interest rate to 9.5 percent from 10 percent while leaving other rates unchanged.

Arinc said the fourth article of the law on the Central Bank orders the bank to support the growth and employment policies set by the government.

"We think that lower interest rates will result in a significant increase in investments and will prompt foreign and domestic investors to be more ambitious. However, when we look at the picture, it is possible to see a uniformity and accord in the Central Bank's decisions," he said.

Arinc also ruled out claims that the government mulled removing Erdem Basci, the Central Bank governor, from office.

Last Mod: 03 Haziran 2014, 14:21
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