ANKARA, Turkey (AP) — Turkey’s central bank on Thursday kept a key interest rate unchanged at 19%, in its first rate decision since the surprise appointment of a new governor that shook confidence in the country’s economy.
President Recep Tayyip Erdogan last month fired his third central bank head in less than two years, raising concerns about a possible return to unconventional monetary policy as the country struggles with persistent inflation.
The Turkish currency plummeted against the dollar, following the appointment of Sahap Kavcioglu who, like Erdogan, has argued for lower interest rates. Typically, higher interest rates shore up a currency and help combat inflation. Erdogan has argued the contrary, that high rates cause inflation.
Kavcioglu however, has since reassured investors by indicating that the bank will follow a tight monetary policy until inflation is brought under control.
“The Monetary Policy Committee has decided to keep the policy rate (one-week repo auction rate) constant at 19%,” the bank said following its closely watched meeting. “The (Central Bank) will continue to use decisively all available instruments in pursuit of the primary objective of price stability.”
Before he was fired last month, Naci Agbal, the previous central bank governor, had raised interest rates by a more-than-expected 2 percentage points, taking the rate to 19%.