On June 30, 2021, Presidential Decree No. 74 establishing a Price Stability Committee (PSC) in Turkey was published in the country’s Official Gazette. The decree entered into force on the day it was published. No meeting of the PSC has been reported yet.
Structure and Powers of the Price Stability Committee
According to the decree, the PSC is formed to “participate in the establishment and sustaining of permanent price stability” and is composed of the (1) minister of the treasury and finance, (2) minister of labor and social security, (3) minister of energy and natural resources, (4) minister of industry and technology, (5) minister of agriculture and forestry, (6) president of strategy and budget, and (7) governor of the Central Bank of Turkey. (Decree art. 2(1)–(2).) The PSC will operate under the Ministry of Treasury and Finance, which will provide the secretariat of the committee. (Art. 2(2).)
Article 3 of the decree provides the PSC with the following duties and powers:
a) Developing structural policy proposals aimed at the establishment of price stability that pay regard to the coordination between monetary and fiscal policy
b) Determining necessary measures by monitoring risks that threaten price stability and issuing decisions aimed at ensuring the measures are implemented by the relevant institutions and establishments
c) Issuing decisions aimed at ensuring that prices determined or steered by public authorities are implemented with a view to sustaining price stability
The PSC has the power to request “from public institutions and establishments all types of information and documents that fall within [the PSC’s] area of authority … in the form and time determined by the [PSC].” (Art. 5.)
Reactions to the Decree
The minister of treasury and finance, Lütfi Elvan, in a statement made on Twitter remarked that the duty to maintain price stability belonged to the Central Bank of Turkey (CBT) and that the establishment of the PSC was by no means an interference with the CBT. Elvan’s tweet stated that the main objective of the PSC was to develop suggestions to counter supply-side shocks that created inflation risks. Law No. 1211 provides that the main objective of the CBT is to maintain price stability and empowers the CBT to determine its own monetary policy and monetary policy instruments to achieve its objective. (Art. 4.)Nevertheless, some commentators in academia and the press criticized the establishment of the committee because, in their view, it could implicitly enable interference with the CBT’s independence. Selva Demiralp, a professor of economics at Koç University, wrote that the creation of such a body outside of the CBT and under the control of the government was unique in the world and risked creating the perception in international observers that the Central Bank—even if symbolically— had been stripped of its mission and authorities, even if it was accepted that the PSC was not created for such ends. Fatih Özatay, professor at TOBB University and former vice governor of the Central Bank, called for the provision to be amended, writing that the presidential decree’s provision granting the PSC the power to issue decisions to ensure the implementation of its own suggested measures was ambiguous and risked allowing the PSC to interfere with matters within the authority of the CBT. Ali Hakan Kara, professor of central banking at Bilkent University and former CBT chief economist expressed doubts that committees such as the PSC would be able to effectively address high inflation, which he ascribed to the CBT’s and the government’s policies in the last few years.