TODAY’S – PM DavutoIlu: I won’t pressure ‘old friend’ BaII

PM DavutoIlu: I won’t pressure ‘old friend’ BaIIPrime Minister Ahmet DavutoIlu has said that while he recently encouraged Central Bank of Turkey President Erdem BaII to lower interest rates, he would not interfere with the bankand#39s independence or pressure his andldquoold friendandrdquo BaII.Following a meeting between DavutoIlu and BaII last week, the latter said he would give the prime minister a briefing prior to attending the G-20 summit next month.

The meeting followed a decision made by the bank on Thursday in which it opted not to lower interest rates, saying that its monetary policy would remain unchanged until a more positive inflation outlook was seen.andldquoEconomic policies are part of a whole.

In Turkey growth rates are not independent of interest policies, while interest policies are not independent of the exchange rate. And none of these are independent of industrial production,andrdquo said DavutoIlu, while speaking to journalists on Sunday.

andldquoI said the same thing to BaII, who is a very old friend of mine. I told him that the independence of the central bank would not be harmed,andrdquo the prime minister added.

DavutoIluand#39s approach towards central bank monetary policy has been markedly different than that of President Recep Tayyip ErdoIan, who has harshly criticized the bank on numerous occasions this year, denouncing its interest rate policies. In January the bank moved to drastically hike the overnight borrowing and lending rates in an effort to save the troubled Turkish lira, which had fallen to nearly 24 to the dollar amid a period of heightened domestic political tension.

The hike enabled the lira to partially recover, although ErdoIan lambasted the decision. Known to despise high interest rates, ErdoIan sees them as a function of what he calls the andldquointerest lobby,andrdquo an alleged international body of financiers determined to weaken Turkeyand#39s economy.

Subsequent slight rate cuts made by the bank were ridiculed by President ErdoIan as insufficient. Following a slight downgrade in May, ErdoIan rhetorically queried: andldquoAre you kidding? You raised the rate five points all at once [in January of this year] and now you are reducing it by half a point,andrdquo while speaking to reporters.

ErdoIan has stated his belief that high inflation is the cause of high interest rates, an unorthodox position in the world of economics.

SOURCE: Today’s Zaman

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