Durmuş Yilmaz: The Central Bank of the Republic of Turkey – the history, recent developments and the future of monetary policy in Turkey Opening remarks by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the Conference on the occasion of celebrating the 75th anniversary of the Central Bank of the Republic of Turkey, Ankara, 1 June 2007. *  *  *  Governors, Colleagues, Friends, and Distinguished Guests, It is a great pleasure to welcome you to this Conference on the occasion of celebrating the 75th anniversary of the Central Bank of the Republic of Turkey. As this conference is also President Trichet’s first official visit to the Central Bank, I would like to express my heartfelt gratitude to him for joining us at this special event. On occasions like these, I believe, it is appropriate to look back and make an assessment of the institutional progress the Central Bank of Turkey has made since its inception. I would therefore like to take this opportunity to share with you the most significant changes taken place in the Bank’s history, and then focus on the recent developments in the implementation of monetary policy. Finally, from a medium to long-term perspective, I would like to say a few words on the future of monetary policy in Turkey.
It was enacted on June 11, 1930 as the Law on the Central Bank of the Republic of Turkey. Accordingly, the Bank started to operate on October 3, 1931 and Mr. Selahattin Çam was appointed as the first General Director, or as we now refer to, as our first Governor. The Law did not involve any explicit provision for the independence of the CBT. However, this did not mean that Lawmakers then did not have any idea about the relationships among money, politics and price level. On the contrary, the founders of the Republic were fully aware of the idea that a central bank should be independent in order to get the best outcome from its policies. Let me quote, for example, _smet _nönü, the Second President of the Republic, in one of his various speeches on the establishment of the Central Bank; “I knew from the very start that the Central Bank had to be an independent institution, operating with the integrity and robustness that would be required against even the Government and the Ministry of Finance, let alone its relations with other private banks”. The law did not stipulate any provisions for granting short term advances to the government to prevent the use of the Central Bank resources for financing government expenditures, and thus to avoid inflation and to maintain fiscal discipline. These are enough evidence that despite no formal provisions for the independence, the CBT was de facto an independent authority in conducting monetary policy.