EBRD says concerns about Turkish financial stability, central bank shakeup

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The European Bank for Reconstruction and Development said a change in the management of Turkey’s central bank has raised concerns about financial stability.

Policymakers need to focus on the battle against inflation, EBRD President Odile Renaud-Basso said in an interview with Reuters published on Wednesday.

“It is clear that changing so often the central bank governor is not good for (its)… credibility,” Renaud-Basso said.

Turkish President Recep Tayyip Erdoğan sacked central bank governor Naci Ağbal overnight on March 19, the day after he raised interest rates to 19 percent from 17 percent to defend the lira and rein in double-digit inflation. Erdoğan is a self-described enemy of high interest rates.

The management change at the bank was the third in less than two years.

It was vital that the Turkish authorities focus on tight monetary policy, fight inflation and refrain from undoing the steps taken by Ağbal, Renaud-Basso said.

“There are some concerns about financial stability and the next steps will be very important,” she said.

Turkey’s consumer price inflation rate rose to 16.2 percent in March from 15.6 percent the previous month, the Turkish Statistical Institute said on Monday. Producer price inflation accelerated to 31.2 percent. Economists expect inflation to nudge higher in April.

Erdoğan said on Wednesday that Turkey aimed to lower interest rates into single digits, a step that he said would reduce costs in the budget.

Turkey is the biggest recipient of EBRD funds, receiving 1.7 billion euros ($2 billion) of a record 11 billion euros in investments last year.

Ahval

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