Moody’s highlights concern about Turkey central bank independence

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Moody's, leading international credit rating institution, is seen on the photo in New York, United States on 21 May, 2014. Cem Ozdel / Anadolu Agency

Amid debates on new Turkish cabinet appointed by President Recep Tayyip Erdoğan, ratings agency Moody’s highlighted concern about the independence of the Turkish central bank on Thursday, saying that further challenges to its effectiveness would be negative for Turkey’s sovereign rating, Reuters reported.

In a note to clients, Moody’s said changes to the governance of the central bank suggested its resolve to tighten monetary policy could weaken in the coming months. This week President Erdoğan appointed his son-in-law Berat Albayrak as treasury and finance minister, hours after being sworn in to a newly strengthened executive presidency.

“It is the further challenges to the effectiveness of the central bank that are most clearly credit negative at this point, given the importance of that institution’s role in addressing the growing imbalances in Turkey’s economy and financial system,” Moody’s said.

Turkey’s stocks and bonds slid for a second day and the lira approached a two-week low amid growing investor unease over President Erdoğan’s expanded grip over the economy, Bloomberg reported on Wednesday.

The lira weakened to a record low of 4.9767 against the dollar late on Wednesday.

Local markets declined as a report showed that the nation’s current-account deficit widened to $5.9 billion in May, exceeding the $5.3 billion estimated by economists in a Bloomberg survey.

Turkey’s large external financing needs leave its assets exposed to shifts in investor sentiment and tightening global monetary conditions in the world’s largest economies.

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