Central Bank Governor Sahap Kavioglu said after his meeting with top bankers and the country’s BDDK banking watchdog that the banking sector and all its actors are ‘in great harmony’.
The governor of Turkey’s central bank said he discussed recent interest rate cuts with bankers in a meeting on Thursday following record lows in the lira, and added that the banking sector is helping to cushion market volatility. was capable.
Turkey’s lira was flat on Thursday after a historic fall this week, triggered by President Tayyip Erdogan’s defense of interest rate cuts, despite widespread criticism of his policy direction.
Governor Sahap Kavioglu said after a meeting with top bankers and the country’s BDDK banking watchdog that he made a general assessment on economic growth, adding that the banking sector was very strong.
“We informed them about everything, be it interest rate cuts and other issues,” Cavacioglu told reporters after the meeting. “The region, the central bank and the BDDK are in great harmony and strong communication.”
The lira was unchanged after the meeting, trading 0.5 per cent higher at 12.025 against the dollar. Before rebounding over the past two days, it hit a record low of 13.45 on Tuesday, a 45 per cent low this year, touching a record low for 11 consecutive sessions.
Global and domestic developments, markets and banking sector developments were discussed in Thursday’s meeting, the Association of Turkish Banks said in a statement, describing the meeting as very beneficial.
A market participant said the BDDK said in the meeting that it would consider measures such as the country’s capital adequacy ratio.
BDDK was not immediately available for comment.
Separately, officials told Reuters that Erdogan had also ignored appeals from within his government to reverse the policy.
Inflation on ‘volatile course’
The central bank had earlier said on Thursday that inflation would follow a volatile course in the short term.
It made the remarks in the minutes of last week’s Monetary Policy Committee meeting, where it reduced its policy rate by 100 basis points to 15 per cent. It has reduced a total of 400 points since September.
“The central bank may accelerate the end of this overshoot by indicating a willingness to end rate cuts and use the hike to protect the lira,” said a note from the Institute of International Finance.
“This will help to re-anchor inflation expectations, which are rising due to FX pass-throughs from devaluations, exacerbating the risk of an accelerated dollar. We maintain our fair value at $/TRY 9.50. “
Many Turks, who are already battling inflation of around 20 per cent, fear that price hikes will accelerate. Opposition leaders have accused Erdogan of dragging the country towards disaster.
Erdogan has defended central bank policy and promised to win its “economic battle for freedom” while pressuring the central bank to go into an aggressive easing cycle with the goal of boosting exports, investment and jobs.
But many economists have called the rate cuts reckless and opposition politicians have called for immediate elections, Turk told Reuters News.