Turkish central bank governor plays down suggestions of rift over September rate cut

Turkish central bank governor Sahap Kavcioglu speaks to the media in Ankara on October 15. Kavcioglu said the bank would consider domestic and international developments before making a rate decision at the next MPC meeting on October 21 and would make “the most correct decision”.

Turkey’s central bank governor on Friday played down suggestions that some of the three policymakers dismissed this week opposed a rate cut, and said they left either of their own choice or because the bank wanted it. President Recep Tayyip Erdogan removed three members of the Monetary Policy Committed on Thursday, two of whom were seen to oppose last month’s interest rate cut, clearing the way for more policy easing. Speaking to reporters, governor Sahap Kavcioglu said people were making wrong assumptions about the removal of the MPC members and that there were no problems at the central bank. “Part of it is our friends’ own preference, part of it is our preference. Talking about it like there is a problem hurts the institution, the central bank,” he said, when asked whether the move was a decision by the president or the governor. Kavcioglu said the MPC members, whose removal was announced hours after he met Erdogan on Thursday, had been involved in rate cuts and rate hikes over the years. “These friends have been doing their duty here for years. People need to study their lesson a little while making a criticism,” he said, adding that the MPC will make its decisions based on data. Kavcioglu said the bank would consider domestic and international developments before making a rate decision at the next MPC meeting on October 21 and would make “the most correct decision”. The lira has declined sharply since the central bank unexpectedly cut its policy rate by 100 basis points to 18% last month. The currency hit a record low of 9.24 against the dollar on Friday and is down some 19% this year. Kavcioglu said the lira’s decline could not be attributed to single factor, and cited the dollar’s rise against other currencies in recent weeks. Kavcioglu was speaking to reporters outside the central bank, after meeting main opposition Republican People’s Party (CHP) leader Kemal Kilicdaroglu. Kilicdaroglu said he had told Kavcioglu there should not be political interference at the central bank and that members should not be removed with decrees. “(The central bank) has a good team...We expressed that we could provide any help that we can in terms of protecting the central bank’s identity, personality,” he told reporters after the rare meeting. Inflation rose to near 20% in September after the rate cut and is exacerbated by the lira’s decline due to Turkey’s heavy import bill priced in hard currencies. “We also expressed our concern about constant decline of the lira’s value because in the coming winter there will be a deluge of price hikes,” he said.