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Turkey’s new central bank governor says April rate cut shouldn’t be taken for granted

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Şahap Kavcıoğlu, the newly appointed governor of Turkey’s central bank, said markets shouldn’t take for granted that he’ll cut interest rates as early as April, when he sets monetary policy for the first time since his surprise appointment.

“I do not approve a prejudiced approach to MPC decisions in April or the following months, that a rate cut will be delivered immediately,” Kavcıoğlu said in a written response to questions emailed by Bloomberg News, referring to a monetary policy committee meeting next month.

“In the new period, we will continue to make our decisions with a corporate monetary policy perspective to ensure a permanent fall in inflation. In this respect, we will also monitor the effects of the policy steps taken so far,” he said.

Kavcıoğlu, an economist and former ruling party lawmaker, was appointed by Turkish President Recep Tayyip Erdoğan on March 20 after Erdoğan sacked Naci Ağbal, who was appointed in November.

No official reason was given for his dismissal, but it came after the central bank sharply hiked its main interest rate by a greater-than-expected 200 basis points from 17 to 19 percent.

Erdoğan is a strong opponent of high interest rates and once called them the “mother and father of all evil.”

Kavcıoğlu, who writes an economy column in the pro-government Yeni Şafak daily, suggested in a February column that the central bank should not insist on a high interest rate policy because it would lead to high inflation.

The central bank chief said, though, that he found it wrong to comment on earlier decisions of the central bank both “in principle and ethically.”

“We strictly adhere to the medium-term inflation target of 5 percent set jointly with the government, and I am aware of its importance of this for sustainable growth,” he said. “When determining the monetary policy stance, we will continue to take into account the realized and expected inflation as well as global capital flows, real yields in peer countries, and the portfolio preferences of residents.”

Kavcıoğlu is the fourth central bank governor to have been appointed since July 2019.

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