Turkey’s Murat Cetinkaya kicked off his first meeting as central bank chief yesterday by trimming the top end of the bank’s interest rate corridor by 50 basis points in what some saw as a sign of more accommodative policy to come. 
The 40-year-old Cetinkaya, the first Islamic finance specialist to hold the position of central bank governor in constitutionally secular Turkey, has taken his position at a time when investors are concerned about potential government pressure on monetary policy. 
President Tayyip Erdogan has repeatedly railed against high interest rates, equating them with treason. As expected, the central bank left its benchmark repo rate unchanged at 7.5% and instead cut the upper band of its interest rate corridor by an expected 50 basis points, to 10%. 
“The new governor may be a little more dovish than we had anticipated,” said William Jackson of Capital Economics in a note. “We had thought that Mr Cetinkaya would tread more cautiously in his first meeting, particularly given concerns in the market about political pressure on the central bank,” he said, adding that the back could cut the overnight rate to 8.5% this year. 
The bank has now kept its benchmark repo rate on hold at 7.5% for 14 consecutive months. Yesterday’s meeting had been widely viewed by market participants as a test for Cetinkaya, who investors fear may not be able to withstand pressure on policy. 
Seventeen out of 21 analysts surveyed by Reuters had predicted a cut of 50 basis points in the overnight lending rate, the highest of the three rates the bank uses to set policy. 
Economy Minister Mustafa Elitas, who has also called on the bank to cut aggressively, said the decision to cut by 50 basis points fell short of his expectations. 
“I had hoped the central bank would do something to trigger excitement and fuel investment, but that expectation was not fully realised,” he told broadcaster CNN Turk. 
In his first public comments since being named governor, Cetinkaya said at a ceremony on Tuesday that he would try to keep inflation in line with targets, maintain a close eye on financial stability and improve communication in order to bolster the bank’s credibility. 
“Decline in global volatility has continued and global financial conditions have improved,” the central bank’s monetary policy committee said in a statement. “The committee decided to take a measured step towards simplification.” 
The policy committee also said the underlying core inflation trend remained limited, necessitating the maintenance of a tight liquidity stance. 
The lira firmed to 2.8085 after the decision, from the previous session’s close of 2.8313. 
That may have been a sign of relief by investors who had feared greater rate cuts.