Turkish Central Bank ‘as Independent as the Fed’ to Economy Czar

Cagan Koc

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It’s getting easier for Turkey to deflect criticism of its central bank’s independence by invoking the U.S. Federal Reserve in the age of Donald Trump.

Just weeks before Recep Tayyip Erdogan fired a central bank governor for not lowering interest rates, Turkey’s president suggested he was on the same page with Trump in calling for looser monetary policy. Rates have come down by more than half since Erdogan’s new appointee took the helm in July.

Yet should anyone question if the central bank is acting under pressure, Turkey’s top economy official said at the World Economic Forum in Davos, Switzerland, that he has a ready answer. It’s “as independent as the Fed,” Treasury and Finance Minister Berat Albayrak said with a smile at a panel discussion on Wednesday.

Autonomy from political interference is increasingly in doubt for central banks from India to Mexico. Breaking with more than two decades of White House tradition of avoiding comments on monetary policy, Trump has kept the U.S. central bank under constant attack, seeking to make Fed Chairman Jerome Powell a potential scapegoat if the economy falters as he seeks re-election this year.

Albayrak, who is also Erdogan’s son-in-law, said Turkey’s central bank is independent in implementing its instruments and deciding on the choice of which tools to use. For the first time ever in the country’s history, institutions including the central bank are all working in sync toward a shared goal, he said.

‘Same Target’

“You’re independent but you have to aim for the same target,” Albayrak said.

Long a believer in an unorthodox theory that high rates cause rather than curb inflation, Erdogan one-upped many of his counterparts thanks to the powers granted to his office after the 2018 general election, which transformed the political system into an executive presidency.

Unafraid to show his influence over monetary policy, Erdogan has repeatedly declared ahead of recent policy meetings that borrowing costs will reach single digits this year. About an hour before the central bank’s latest rate cut brought the benchmark to 11.25% this month, the president preempted its decision by announcing that “rates have fallen.”

While Turkish assets have been resilient since the central bank unleashed rate cuts, Fitch Ratings has started to sound alarm, saying in a Jan. 16 report that Turkey’s monetary-policy credibility is “still a key rating weakness.”

To contact the reporter on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Paul Abelsky, Constantine Courcoulas

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