Turkish lira plunges after Erdogan sacked central bank officials

In the early hours of Thursday, Turkish President Recep Tayyip Erdogan issued a decision to dismiss 3 central bank officials and appoint two others.

The exemption decision, which was published in the Official Gazette, concerns the two Vice President of the Central Bank, Semih Toman, Ugur Namik Koçek, and a member of the Monetary Policy Council, Abdullah Yavas, less than 5 months after his appointment to this position.

Turkish lira

The decision also included the appointment of “Taha Chanak” as Vice President of the Central Bank, and “Youssef Tuna” as a member of the Monetary Policy Council.

The decision comes after an important meeting held by President Erdogan with the Governor of the Central Bank of Turkey, Shehab Kavcioglu, in the capital, Ankara, on Thursday night.

As a result of this decision, Turkish lira depreciation To its lowest level, breaking a new record for the third time in a row today, exceeding 9.18 pounds per US dollar.

The central bank last month 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.”

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

Opposing voices

The changes get rid of the committee members who disagreed with Erdogan’s calls to continue lowering prices, according to sources familiar with the committee’s formation who spoke to “Bloomberg”.

The change paves the way for the Turkish president to exert greater influence on the bank’s policy-making committee, which he says should continue to lower borrowing costs.

He describes Erdogan as the “enemy” of interest rates, and espouses the unorthodox theory that lowering interest rates will lead to lower inflation.

He appointed Kavcioglu in March, replacing his hardline predecessor, Naji Agbal, after successive price increases. Kavcioglu kept policy unchanged for nearly 6 months before unexpectedly lowering the benchmark interest rate by 100 basis points to 18% in September, when consumer price inflation accelerated to 19.6%.

Last week, Erdogan’s office denied a media report that the president had lost confidence in Kavcioglu. The Turkish presidency posted a photo of the two men together on Twitter after Wednesday’s meeting, and the president’s office described their conversation as “positive”.

Taha Canak, deputy head of the BDDK since 2019, was appointed as deputy governor by Erdogan’s midnight decree in the Official Gazette. Youssef Tuna, Professor of Economics and Member of the Board of Directors of Sekerbank, has been appointed as a member of the Monetary Policy Committee.

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