Turkey central bank kept a significant interest rate unchanged at 19% on Thursday, following the surprise appointment of a new governor that shook confidence in the country’s economy.
President Recep Tayyip Erdogan last month fired his third central bank chief in less than two years, who has been voicing concern about a possible return to non-traditional monetary policy as the country continues to grapple with inflation.
The Turkish currency fell against the dollar, much like Elpogan, which has argued for lower interest rates after the appointment of Sahap Kavisoglu. Typically, higher interest rates increase the currency and help in tackling inflation. Erdogan has argued to the contrary that higher rates cause inflation.
However, Kavisoglu has assured investors that the bank will follow a tight monetary policy until inflation is brought under control.
The bank said that the Monetary Policy Committee has decided to maintain the policy rate (one week repo auction rate) at 19%. “(Central Bank) will continue to use all available tools decisively in the pursuit of the primary objective of price stability.”
Before he was fired last month, the previous central bank governor, Nassi Agbal, raised the interest rate by more than 2 percent to 19%.