Deputy PM rejects risk rumors on Turkish Central Bank

Published 26.11.2015 23:02
Updated 26.11.2015 23:05
Deputy PM rejects risk rumors on Turkish Central Bank

Deputy Prime Minister Mehmet Şimşek has responded to discussions that have emerged after the new government program failed to mention that the Central Bank of the Republic of Turkey (CRBT) can independently set its monetary policies and instruments. Şimşek responded to the discussions via his Twitter account, saying that speculation over the independency of the Central Bank did not reflect the truth. Şimşek said: "The statements in the new government program are compatible with the articles in CRBT law. The system of announcing inflation targets will not change either. The primary duty of the Central Bank is to ensure price stability. It will continue to independently set its monetary policy instruments."

The 64th government's program, which was unveiled by Prime Minister Ahmet Davutoğlu on Thursday, has led to discussions about the independence of the CRBT in domestic markets. Previous government programs have included the statement: "The Central Bank of the Republic of Turkey (CRBT) will continue to independently determine monetary policies and monetary policy instruments that it will implement in order to ensure price stability." However, the new government program changed this expression to the following: "It will continue as a basis that the CRBT will directly set monetary policy instruments that it will use to ensure price stability." Furthermore, the new government program removed the reference to "publicly announced" inflation targets which was in the original statement which indicated that "Inflation targets will be set by both the government and the central bank for a three-year period and will be publicly announced."

With these discussions having broad repercussion in the media, the dollar started to rise against the Turkish lira. It started to rally in response to the tensions between Turkey and Russia, rising from TL 2.8852 to TL 2.90 in the morning trading in less than one hour, after markets evaluated messages about the independence of the CRBT. After Şimşek's tweet, the lira recovered half of its losses against the dollar, closing at 2.8930.

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