Turkey's new central bank chief vows to fight inflation

AFP

21st March, 2021 05:30:12 printer

Turkey's new central bank chief vows to fight inflation

Turkey's new central bank governor vowed Sunday to tackle inflation in a bid to reassure the financial markets, which have been rocked by the sudden sacking of his predecessor.

A presidential decree late Friday announced that Naci Agbal, a market-friendly former finance minister, was being replaced with Sahap Kavcioglu, a former ruling party lawmaker.

No explanation for Agbal's sacking was given, but the announcement came just a day after the central bank sharply raised the main interest rate to 19 percent.

That move, an effort to fight high inflation, had been welcomed by the markets.

But Turkish President Recep Tayyip Erdogan, an advocate of economic growth at all costs, is hostile to high interest rates, once describing them as "the mother and father of all evil".

Analysts say the new central bank chief, an economist by training, subscribes to Erdogan's unorthodox belief that higher interest rates cause inflation.

Most economists believe that higher interests rates slow inflation down by raising the cost of doing business.

But Kavcioglu argued in a column for the pro-government Yeni Safak newspaper last month that higher interest rates "indirectly" lead to higher inflation.

His first public comments since his appointment nonetheless appeared to be aimed at reassuring the markets.

"The Central Bank of the Republic of Turkey will continue to use the monetary policy tools effectively in line with its main objective of achieving a permanent fall in inflation," he said in a statement.

"Monetary Policy Committee Meetings will be held as previously scheduled and announced to the public."

Stubbornly high inflation, coupled with a slide in the value of the Turkish lira, has dented Erdogan's popularity in recent years.

Annual inflation rose to 15.6 percent in February.


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