Central Bank of Turkey: Trust takes time
It is not only for the central bank that the latest statements now need to be filled with life. Further developments in Turkey are also likely to depend on whether President Erdogan maintains the backing he has recently expressed for the more restrictive monetary policy stance in the long term. After all, it was not least his repeatedly publicly propagated demands for low key interest rates in recent years, combined with the unorthodox notion of being able to use them to reduce price pressure, that brought the country and its currency into the prevailing misery in the first place.
As long as doubts about the sustainability of the turnaround in Turkish monetary and economic policy have not been completely dispelled, international investors are likely to act cautiously. The abundant global liquidity and the low level of returns in the industrialized nations will not change this situation. In the coming weeks and months, it will be particularly important for the lira that the central bank succeeds in implementing an appropriate monetary policy and establishing a perceived independence from the short-term interests of the government. Otherwise, the premature praise for Agbal & Co. is likely to be quickly exhausted.
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