The Turkish Central Bank (TCMB) recently decided to leave key interest rates unchanged at 24%. Probably even more important was the renewed confirmation of the bank’s intention to keep to its tight monetary course „until the inflation outlook shows a marked improvement“, with „further monetary tightening being delivered”, if necessary. With the local elections due to take place at the end of this month, the recent decision should generally underscore the central bank’s reputation. Although monetary independence in Turkey is not quite as strong as in the US, the UK or EMU, efforts to counter the continuing price pressure appear to be high on the central bank’s agenda.
All in all, the recent decision of the Turkish Central Bank represents a positive development for Turkey. A politically independent central bank is a valuable asset for a country, and attempts to damage or restrict this independence usually create greater reluctance on the part of foreign investors. Bearing this in mind, recent developments in Turkey can be viewed as a step towards normalisation. Nonetheless, the government should refrain in the future from intervening in the decisions of the central bank, even in difficult times. The Turkish lira should then also be able to appreciate more noticeably again in the medium term.