Turkish central bank chief says battle with inflation not temporary

Turkish central bank governor Naci Ağbal pledged to fight a long-term battle against inflation in the country in a blog post on Friday.

Ağbal said a new era in monetary policy had begun in November, when he was appointed by President Recep Tayyip Erdoğan. The central bank has since tightened monetary policy and is committed to slowing inflation to a 5 percent goal by 2023 and keeping it there, he said.

“We would like to underline that our strategy is not temporary, but a medium-term strategy and will be implemented decisively until we reach our goals,” Ağbal said.

Investors in Turkey have raised concerns that Ağbal’s inflation-fighting policies will be undermined by Erdoğan, who has regularly opposed high interest rates saying they stoke price increases. Ağbal’s predecessor Murat Uysal helped Erdoğan engineer a borrowing boom by keeping interest rates at below annual inflation last year.

The Turkish lira slid to a record low of 8.58 per dollar just prior to Ağbal’s appointment. It rallied to as strong as 6.9 per dollar in February after the central bank hiked interest rates to 17 percent from 10.25 percent in November and December. The currency has since slipped to trade at around 7.5 per dollar as concerns about inflation returned and the bank left rates on hold.

Annual consumer price inflation in the country accelerated to 15.6 percent in February from 15 percent the previous month, led by a surge in food and health costs, the Turkish Statistical Institute said on Wednesday.

Some economists expect inflation to nudge higher in March and April, putting the central bank’s year-end goal of 9.4 percent in jeopardy.

“In the upcoming period, we will continue to take firm steps towards achieving price stability through a confidence-oriented monetary policy,” Ağbal said.

The lira traded up 0.2 percent at 7.48 per dollar as of 3:36 p.m. in Istanbul, reversing losses earlier in the day.    

The central bank's monetary policy committee is due to meet to decide on interest rates on March 18.