Reuters/Istanbul

Turkey’s central bank lowered its main interest rate yesterday and drew a swift rebuke from government ministers who said the 50

basis point cut, five months ahead of a parliamentary election, was not enough to support economic growth.
The barrage of complaints from Deputy Prime Minister Numan Kurtulmus, Economy Minister Nihat Zeybekci and presidential adviser

Yigit Bulut sent the lira to a two-week low amid concerns over growing political pressure on monetary policy.
The bank trimmed its main one-week repo rate by 50 basis points to 7.75% in response to slowing inflation, a sharper cut than

many economists had expected, but left other interest rates on hold.
Hours later, Kurtulmus took to Twitter to say the bank’s move was “at odds” with the government’s economic vision.
“With this decision it has unfortunately become more difficult to achieve growth, employment and inflation targets,” he wrote.
Last week, President Tayyip Erdogan warned he might summon central bank officials if they did not respond to his repeated calls

for lower rates to boost growth.
The lira initially firmed after the rate cut as traders voiced relief that the bank had not yielded to political pressure with a

deeper reduction. After the ministers’ comments, it dropped to 2.35 to the dollar, its weakest since January 5.
“It’s hard to say (the rate cut) is just due to political pressure because there was a downside surprise in inflation in

December,” Finansbank economist Gokce Celik said.
“But the comments from government are damaging the credibility of the central bank. Even if they (the bank) did it for economic

reasons, that’s not what it looks like from outside.” Bolstering economic growth would improve the ruling AK Party’s prospects of

winning a two-thirds majority in the June election and thereby help Erdogan in his drive to build a strong executive presidency.
Economic growth slowed to 1.7% year-on-year in the third quarter, below a Reuters forecast of 3%, indicating the government will

not meet its 4% full-year target.
The central bank’s battle against inflation, even as the economy slows and conflict continues in neighbouring countries, has been

helped by the slide in global oil and commodity prices.
Yesterday’s decision came after data showed annual consumer price inflation eased to 8.17% in December from 9.15% in November.

The latest central bank survey of business leaders pointed to end-2015 inflation of 6.82%, still above the 5% target.
Of 20 economists polled by Reuters, 11 had expected a cut in the main rate, with eight forecasting a quarter of a percentage

point reduction and three anticipating a 50 basis point cut.
The bank described the rate cut as “measured” and said it would keep its overall monetary policy tight until there was a

significant improvement in the inflation outlook.
But with Economy Minister Zeybekci already calling for cuts in other interest rates and presidential adviser Bulut suggesting it

take further action at an extraordinary meeting, that aim could prove increasingly difficult.
“The fact that the central bank opted to cut rates—and fairly aggressively at that—despite an inflation rate that remains way

above its target says much about the conduct of Turkish monetary policy,” said Nicholas Spiro of Spiro Sovereign Strategy in

London.
“Once again, questions will be raised about the independence of Turkey’s central bank.”

Turkey’s central bank headquarters is seen in Ankara. The bank yesterday trimmed its main one-week repo rate by 50 basis points

to 7.75% in response to slowing
inflation, a sharper cut than many economists had expected, but left other interest rates on

hold.