Erdogan dismisses 3 central bank officials… and the lira falls to a new record

Erdogan dismisses 3 central bank officials… and the lira falls to a new record
Erdogan dismisses 3 central bank officials… and the lira falls to a new record

The Official Gazette reported that Turkish President Recep Tayyip Erdogan dismissed three members of the Central Bank’s Monetary Policy Committee and appointed two new members in their place, which plunged the lira to new record levels.

The newspaper added that the isolated ones are the Deputy Governor of the Bank, Semih Toman, and Ugur Namek, as well as a member of the Monetary Policy Committee, Abdullah Yavas.

Erdogan appointed Taha Cakmak as deputy governor of the Central Bank, and Yusuf Tuna as a member of the Monetary Policy Committee.

After the announcement, the Turkish lira fell to a new record low of 9.1900 against the dollar, bringing its losses since the beginning of the year to 19% on monetary policy concerns.

And the Turkish presidency announced on Wednesday evening that Erdogan had met Central Bank Governor Shihab Kavcioglu, and published a picture of the two of them standing side by side.

Last month, the central bank cut the key interest rate to 18% from 19%, despite annual inflation rising to around 20%, in a move analysts saw as fresh evidence of political interference from Erdogan, who describes himself as an enemy of interest rates.

Kavcioglu said this week that the rate cut was not a surprise and had little to do with the subsequent sale of the lira.

The Central Bank’s Monetary Policy Committee will hold its next meeting on October 21.

Three well-informed sources said last week that Erdogan was losing confidence in Kavcioglu less than seven months after his predecessor was ousted, and that there had been little contact between the two in the past few weeks.

Erdogan has made a series of changes to the Monetary Policy Committee in the past few years. He has fired three governors in the past two and a half years over policy differences, affecting the lira and severely damaging the credibility and predictability of monetary policy.

The headline inflation rate reached its highest level in two and a half years at 19.58% in September.

Erdogan appointed Kavcioglu in March after ousting Naji Iqbal, a monetary policy hawk, and raising interest rates to 19%.

Erdogan ramped up pressure for a rate cut in June, when he publicly said he had spoken to Kavcioglu about the need for a rate cut after August.

 
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