Turkey’s Central Bank is as independent as the U.S. Federal Reserve, Turkey’s Treasury and Finance Minister Berat Albayrak has said in the World Economic Forum (WEF) in Davos, where he held a meeting with U.S. Treasury Secretary Steven Mnuchin.
“The Central Bank is at least as independent as the FED. This year, we expect inflation to be stable and in a single digit,” Albayrak said on Jan. 23, adding that the Central Bank implements policies to ensure financial stability to mitigate the risks of reducing financial shocks.
“In order to ensure the growth of Turkey, which has a gigantic base of production and population, the Central Bank also works to bring financial stability,” he also said.
Meanwhile, no details were shared of the meeting Albayrak held with Mnuchin.
The meeting comes amid an ongoing rift between Ankara and Washington over U.S. probe of Turkish state-run bank Halkbank on charges of aiding a years-long scheme to help Iran evade U.S. economic sanctions.
Also on Jan. 23, Turkey’s Central Bank has said that Turkish policymakers must keep a lid on financial volatility and deliver predictable fiscal policies to keep an economic recovery on track, adding its own policy will depend on further disinflation.
In the minutes of its policy meeting last week, released on Jan. 23, the bank also said inflation expectations continue to improve and are broadly in line with its projection of 8.2 percent by year end, lower than most economists expect.
The bank has cut its key interest rate to 11.25 percent from 24 percent since July on the back of a stabilization in the lira and a drop in inflation, which was 11.8 percent in December.
To “minimize a likely inflation-growth trade-off, it will be crucial that macro-financial policies [reduce] financial volatility…and that the predictability of the fiscal policy continues to be reinforced,” the bank said.
Turkey’s economy is recovering from a brief but sharp recession brought on by a currency crisis in 2018. The government expects growth to jump to a 5 percent rate this year, more than most analysts expect.
While the bank has said it has less room to continue easing policy, analysts expect it to cut rates a little more in coming months.
“Keeping the disinflation process on track with the targeted path requires the continuation of a cautious monetary stance,” the bank said in the minutes. Policy will hinge on “indicators of the underlying inflation trend to ensure the continuation of the disinflation process,” it added.
The Central Bank started rate cuts after President Recep Tayyip Erdoğan removed the previous Central Bank governor because he was not following instructions on monetary policy, a move which heightened concerns over its independence.