EconoMonitor : Thoughts From Across the Atlantic » Turkish Monetary Policy at the Crossroads

EconoMonitor : Thoughts From Across the Atlantic » Turkish Monetary Policy at the Crossroads:



"The Turkish lira has been declining in value for eight months, and the drop has accelerated recently. The decline of the lira has been part of a broader decline in emerging market currencies. However, the depreciation of the Turkish lira has been more extreme. Following the latest drop in the value of the lira, the Turkish central bank made a surprisingly large increase in interest rates on January 28th. The increase was publicly opposed by Prime Minister Erdogan, who has attributed attempts to raise rates to a vague “interest rate lobby”. The disagreement on interest rate policy between the central bank and the prime minister can be interpreted as an attack on central bank independence, although Mr. Erdogan publicly acknowledged the Bank’s independence. The move by the central bank also illustrates the limits on central bank influence imposed by the Policy Trilemma."



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