Turkey central bank chief joins Albayrak in talking up economy at Davos

Turkish Central Bank Governor Murat Uysal gave an optimistic appraisal of Turkey’s economy at the World Economic Forum in Davos, Switzerland, on Wednesday, matching the government line on growth, inflation and interest rates.

Uysal indicated in an interview with CNN Türk television that the central bank would continue cutting its benchmark interest rate in 2020, although at a reduced pace, citing slowing inflation, a steady currency and positive investor sentiment.

Turkey’s central bank has front-loaded rate reductions in recent months, slashing its benchmark by 1,275 basis points, or 12.75 percent, to 11.25 percent since July, when President Recep Tayyip Erdoğan sacked Uysal’s predecessor. Turkey now has negative real interest rates – consumer price inflation currently stands at 11.8 percent.

“I think we will see single-digit inflation from the middle of this year,” said Uysal, who has accompanied Treasury and Finance Minister Berat Albayrak to Davos. “When we look at expected inflation, I can say that we can foresee positive real returns (for investors) going forward.”

Uysal said that the central bank’s latest interest rate reduction of 75 basis points in January was “measured”, also signalling that rate cuts would be moderated going forward.     

The governor said the central bank’s ability to react to developments in inflation had been strengthened by a decision late last year to hold interest rate meetings on a monthly basis.

Uysal said the lira’s level against the dollar would contribute to positive developments in the current account, which has posted monthly surpluses as imports contracted and exports grew. A cheaper lira helps Turkish companies export more products and helps curb imports.

The central bank’s Monetary Policy Committee next meets to decide on interest rates on Feb. 19.