Central Bank Governor Sahap Kavcioglu said after a meeting with major bankers and the country’s BDDK bank watchdog that the banking sector and all its actors are “very much in harmony”.
The governor of Turkey’s central bank said he discussed recent interest rate cuts with bankers at a meeting on Thursday after the lira rose to record lows, and said the banking sector was able to overcome market volatility.
The Turkish lira was blurred on Thursday, following a fall to a record low this week as President Tayyip Erdogan pushed for a defense of interest rate cuts, despite widespread criticism of the direction of his policy.
Governor Sahap Kavcioglu said after a meeting with major bankers and the country’s BDDK banking watchdog that general assessments of economic development had been made, and said the banking sector was very strong.
“We informed them of everything, there were interest rate cuts and other issues,” Kavcioglu told reporters after the meeting. “The sector, the central bank and the BDDK are very harmonious and in strong communication.”
The lira did not change after the meeting, firming 0.5 percent at $ 12,025. In the last two days before the rebound, he hit a record 13.45 on Tuesday, down 45 percent this year, hitting a record 11 consecutive sessions.
Global and domestic developments, markets and developments in the banking sector were discussed at Thursday’s meeting, the Turkish Banking Association said in a statement, describing the meeting as very beneficial.
One market participant said the BDDK said at the meeting that it would consider measures such as the capital adequacy ratio of the country.
BDDK was not immediately available for comment.
Separately, officials told Reuters that Erdogan had ignored the appeals, even within his government, to change the policy.
Inflation in the “volatile trajectory”
The central bank said earlier on Thursday that inflation would continue its volatile path in the short term.
He made comments in the minutes of last week’s monetary policy committee meeting, where he reduced his policy rate by 100 basis points to 15 percent. The rate has dropped a total of 400 points since September.
“The central bank can speed up the end of this overrun by indicating an end to rate cuts and a willingness to use the rise in defense of the pound,” a note from the International Finance Institute said.
“This would help re-anchor inflation expectations, which is due to the rising devaluation as a result of FX transmission, increasing the risk of accelerated dollarization. We keep our fair value at $ 9.50 / TRY.”
Many Turks, already facing inflation of around 20 per cent, fear that price rises will accelerate. Opposition politicians have accused Erdogan of leading the country to disaster.
Erdogan has defended the central bank’s policy and pledged to win its “economic war of independence” by moving to an aggressive easing cycle to boost exports, investment and employment after putting pressure on the central bank.
But many economists have called the rate cuts irresponsible and opposition politicians have called for an immediate election, Turks told Reuters news.