Turkish ministers sing differing tunes over interest rate policy

Prime Minister Recep Tayyip Erdoğan’s sharp criticism of the Central Bank over its interest rate policy has exposed a split among Turkey’s top economic managers, who are divided over the limits to interference in the bank’s independence.

Erdogan said earlier this week that the Central Bank’s surprise interest rate cut last week, which followed a huge rate hike in late January, was insufficient.

While Economy Minister Nihat Zeybekçi joined Erdoğan in slamming the lender for not reducing interest rates and for jeopardizing investment, Deputy Prime Minister Ali Babacan and Finance Minister Mehmet Şimşek noted the importance of the bank’s autonomy and the need to protect it from political pressure.
“The Central Bank’s credibility and independence is very important for the future of the Turkish economy,” Şimşek said at the Turkish-Arab Economic Forum in Istanbul. 

“I believe the Central Bank did and will do the best for our country’s interests,” he said. “The Central Bank’s independence is one of the biggest gains of the last decade.”

When asked about the issue, Şimşek said he agreed with Babacan, who had laid emphasis on the significance of protecting the institution from assaults on its autonomy.

 â€œOur institutions should continue working without giving up their main principles and compromising their assigned positions,” Babacan said May 27.

“Turkey’s future is bright as long as we, as the government and the Parliament, keep implementing the written rules. But if the fundamental principles begin to be compromised and if the promised policies are abandoned, you...