Turkey Central Bank Chief Pledges Permanent Price Stability

Turkey’s newly appointed central bank Governor Sahap Kavcioglu pledged to use monetary policy tools effectively to deliver permanent price stability.

In a written statement on Sunday, his first since being appointed on Saturday, Kavcioglu said the bank’s interest-rate-setting meetings will take place according to the previously announced schedule.

The central bank “will continue to use the monetary policy tools effectively in line with its main objective of achieving a permanent fall in inflation,” Kavcioglu said. “The decline in inflation will foster macroeconomic stability through the fall in country risk premiums and a permanent improvement in financing costs, and will contribute to the development of conditions essential for sustainable growth that will enhance investment, production, exports and employment.”

Kavcioglu replaced Naci Agbal, who was removed from the job by President Recep Tayyip Erdogan after raising interest rates by 875 basis points since his appointment in November.

What Bloomberg Economics Says

“Erdogan’s unexpected decision to fire Naci Agbal as central bank governor highlights the dilemma facing any incumbent in the post. If they heed Erdogan’s calls for low interest rates they lose control of the currency. If they do the right thing and tighten policy they lose their job. Agbal has lost his position. His successor, Sahap Kavcioglu, will likely lose the lira.”

--Ziad Daoud, chief emerging markets economist. For full REACT, click here

Erdogan Ousts Central-Bank Head, Installs Interest-Rate Ally

Kavcioglu will hold a call with representatives of local banks at 4 p.m. Istanbul time on Sunday, according to a central bank spokesman.

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