Erdoğan completes assimilation of Turkey’s central bank, columnist says

Turkey’s central bank has finally been assimilated to the new presidential system of government in the country, columnist Taha Akyol said.

Firstly, laws governing the central bank were changed last year via presidential decree, then the governor and heads of department were replaced in the past few weeks, Akyol, a veteran columnist, said in Karar newspaper on Sunday.

Leading central bank economists no longer work there, Akyol said, citing Professor Selva Demiralp, an expert on monetary policy.

“Two of four central bank economists I worked with on an article for a highly respected international journal went abroad in recent years. The remaining two have been dismissed. The future picture is clear. What a shame,” Demiralp said, according to Akyol.

Political tensions between President Recep Tayyip Erdoğan and the central bank were particularly acute during election periods, when Erdoğan would slam policymakers for decisions to hike interest rates. Former economy ministers Ali Babacan and Mehmet Simsek had defended the institution, but with their departure came the demise of the central bank’s independence, Akyol said.

While Erdoğan has always criticised higher interest rates, modern economists have no opinion on whether higher rates are good or bad, merely seeing interest rates as a tool to attain their goals, Akyol said.  

The central bank was right to hike its benchmark rate to 24 percent last year to defend the lira and rein in inflation, Akyol said.

It is clear that the law is no longer enough to protect the bank’s independence under the current political system, Akyol said. Its independence should be written into the constitution instead, he said.