Turkish PM Erdoğan criticizes Central Bank over interest rates
ANKARA - Reuters
Turkish Central Bank Gov. Erdem Başçı gave no signals of an immediate rate cut during a critical and much-anticipated presentation in front of Erdoğan on June 2, but sought to draw an optimistic picture of the economy.Turkish Prime Minister Tayyip Erdoğan, who has criticized the Central Bank for not cutting interest rates enough, said he did not accept Governor Erdem Başçı's approach on rates and hoped the bank would act immediately to resolve the issue.
Speaking to reporters a day after Başçı briefed the cabinet on central bank policy, Erdoğan 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," Erdoğan 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 Erdoğan, who is eager to maintain economic growth ahead of an August presidential election and parliamentary polls in 2015.
Erdoğan 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.