Berat Albayrak, the Turkish Treasury and Finance Minister/Bloomberg
Last week, the Turkiye Cumhuriyet Merkez Bankasi (TCMB) slashed its benchmark policy rate, the one-week repo rate, by 425 basis points from 24 per cent to 19.75 per cent.
Wednesday 31, July 2019
Turkish Treasury and Finance Minister said that the country’s borrowing costs are headed lower but stressed that the scale of monetary easing remains up to the central bank, reported Bloomberg.
Berat Albayrak, the Turkish Treasury and Finance Minister, said, “Turkey will make a significant reduction in interest rates, but we’re not the ones to determine the margin of that, the central bank is taking steps, looking at the data.”
The pivot toward monetary easing by Governor Murat Uysal raised questions about how he will reconcile the central bank’s priorities with President Erdogan’s drive for economic growth and his unorthodox theory that high-interest rates cause rather than curb inflation.
The Turkish President fired Murat Cetinkaya as governor this month for failing to act.
Albayrak said that he views the decline in interest rates positively, due to the cuts in the costs of the real sector, adding that inflation will end the year below the government’s target of 15.9 per cent.
Powerful base effects will likely continue to choke off inflation, which is already down almost five percentage points so far this year. The central bank, which is due to release its updated outlook for price growth this week, has said that recent forecast revisions indicate that inflation will probably end the year slightly below the 14.6 per cent projected in its April report.
Turkey’s economic growth will be positive this year and probably close to the government’s forecast for a gain of 2.3 per cent in 2019, added Albayrak.
Additionally, the Treasury Chief said that Turkey is likely to run a budget shortfall below three per cent of the gross domestic product as revenue recovers in the second half, that would still be well above the deficit target of 1.8 per cent for this year.
The government has no funding issue and believes it can easily borrow at home and abroad, added Albayrak. The finance minister described the level of indebtedness and financial conditions of Turkish households and companies as being in a ‘good shape’ compared to Turkey’s peers.