June 25, 2018 / 12:19 PM / 3 months ago

Erdogan adviser says central bank independence 'fundamental'

ANKARA (Reuters) - The Turkish central bank’s independence is “fundamental” and it will act according to market needs and realities, President Tayyip Erdogan’s chief economic adviser Cemil Ertem said on Monday, a day after presidential elections.

FILE PHOTO - Presidential Adviser Cemil Ertem poses after an interview with Reuters in Ankara, Turkey, January 9, 2018. Picture taken January 9, 2018. REUTERS/Umit Bektas

Erdogan won sweeping new executive powers on Monday after his victory in landmark elections that also saw his Islamist-rooted AK Party and its nationalist allies secure a majority in parliament.

Investors have been concerned that Erdogan, a self-described “enemy of interest rates”, would exert more pressure on the central bank to lower interest rates, following the election.

“No one should doubt that the (central bank) will take steps according to market needs and realities,” Ertem told Reuters in an interview on Monday.

The central bank has hiked interest rates by 500 basis points since late April in an effort to put a floor under the ailing lira TRYTOM=D3, which declined as much as 20 percent against the dollar this year.

Officials have also promised to support the tight monetary policy with new arrangements in fiscal policy.

Ertem said steps to ensure the harmony between fiscal and monetary policies would be taken more decisively.

“We will take strong steps in budget discipline on the side of budget income and spending,” he said, adding that the government will focus on economic targets and reforms with the elections out of the way.

Investors have expressed concern about overheating of Turkey’s economy. The government introduced incentive packages and tax amnesties to businesses and subsidies to certain sectors in the recent years to stimulate economy and boost growth. It also promised to roll out a debt restructuring and social reforms package ahead of recent elections.

Reporting by Nevzat Devranoglu; Writing by Daren Butler and Ali Kucukgocmen; Editing by Dominic Evans and David Dolan

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