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article imageTurkey's new finance supremo seeks to reassure rattled markets

By AFP     Jul 12, 2018 in World

Turkey's new finance minister, the son-in-law of President Recep Tayyip Erdogan, on Thursday sought to reassure financial markets rattled by his appointment by saying the independence of the central bank was not open to question.

Erdogan on Monday named Berat Albayrak, the husband of his elder daughter Esra, as treasury and finance minister in a cabinet reshuffle for his new term.

The lira has lost over six percent in value against the dollar since his appointment and fell sharply late on Wednesday to new record lows to trade precariously close to 5 to the dollar for the first time.

A key concern of markets has been the independence of the central bank, with Erdogan repeatedly urging rate cuts despite high inflation and now able to directly appoint its leadership under the new presidential system.

"The independence of the central bank and its decision-making mechanisms cannot be a subject of speculation," Albayrak was quoted as saying by the state-run Anadolu news agency.

He said that the central bank's capacities should be widened in the pursuit of price stability. "One of the main aims of our policies in the new period is a central bank that is effective like never before," he said.

Markets are also concerned that Erdogan underestimates the dangers posed by inflation, which surged to over 15 percent in June for the first time in almost one-and-a-half decades.

The president was quoted by Turkish newspapers including the Hurriyet newspaper on Wednesday as saying "we will see a decrease in interest rates," and warning high interest rates could hurt employment.

But Albayrak said that the "fundamental priority" in the upcoming period would be fighting inflation.

"We will take steps to first bring inflation in the shortest time down to single digits and then to our target," he added.

The recent inflation figures have made a mockery of the central bank's inflation target of 5 percent.

Albayrak's comments helped the lira make up some of its losses from Wednesday, trading at 4.8 to the dollar, a gain in value of 2.1 percent on the day.

Erdogan built much of his popularity on his stewardship of the economy which helped lift Turkey from the traumas of hyperinflation and the 2001 financial crisis.

But even after his outright win in last month's presidential elections, economists warn that Erdogan needs to tackle growing imbalances in the economy.

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