An association of Turkey’s biggest firms called for tight monetary and fiscal policy two days after President Recep Tayyip Erdoğan sacked the central bank’s governor for failing to lower interest rates.
The central bank has to be allowed to set interest rates free of political interference, Simone Kaslowski, the head of the Turkish Industry and Business Association (TUSIAD), told the state-run Anadolu news agency on Monday.
“The independence of the central bank is a condition of macro-economic stability,” Kaslowski said. “We must take special care about central bank independence as we are one of the countries with the highest inflation rates in the world.”
Erdoğan fired Governor Murat Çetinkaya via a presidential decree at the weekend, replacing him with Murat Uysal, known for his more dovish stance on interest rates. Erdoğan maintains that higher interest costs cause inflation, a belief that jars with conventional economic theory.
Turkey’s annual inflation rate slowed to 15.7 percent in June from 18.7 percent the previous month. Price increases have eased since the central bank hiked rates by 625 basis points to 24 percent in October and the economy entered a severe downturn.
Kaslowski also called for measures to deal with non-performing loans at the country’s banks, saying Turkey couldn’t delay debt repayments through government-approved schemes and pretend all was well.
Turkey’s government can also no longer deal with budgetary problems through one-off measures and should find more savings in order to spend, he said.