Turkey's central bank chief fired as recession hits economy

Ann Santiago
July 8, 2019

Turkey's new central bank governor Murat Cetinkaya speaks during a brief ceremony at which he officially took over from outgoing governor Erdem Basci in Ankara, Turkey, April 19, 2016.

Deputy Governor Murat Uysal was named as a replacement, according to a presidential decree in Saturday's Official Gazette.

However, there were no official reasons for the move but, markets have formed a theory in recent weeks that the governor may be ousted because of his unwillingness regarding cut rates.

"The difference of opinions between the governor and the ministers in charge of the economy has deepened in the recent period", said one of the sources.

Erdogan has frequently criticized the central bank for keeping borrowing costs high.

In his first statement as governor, Mr Uysal said the bank would continue to act independently and focus on maintaining price stability as its central goal.

The Turkish leader called for lowering the interest rates to boost the economy, describing high rates as "the mother and father of all evils".

Erdogan believes lowering interest rates will increase economic growth, but the central bank past year instead raised its benchmark interest rate from 17.5 percent to 24 percent, arguing that the hike was necessary to fight inflation and boost the lira.

The announcement has prompted renewed concern over the Central Bank's independence.

"He will hold a press conference within this frame in the coming days", the statement added.

Annual inflation hit a 15-year high in October above 25%, but later dipped and is now running just over 15.5%.

After a trade dispute with the USA previous year, Washington imposed sanctions on Turkey and tariffs on some Turkish goods, leading to a 30 per cent slide in the lira's value. The independence of the Central Bank had been made by Erdogan repeatedly called into question.

"The removal of the governor from duty creates doubt regarding the job security of the head banker and the bank's independence".

Turkey yesterday fired its central bank governor as policy differences between the government and the bank deepened in the face of an economic slump, volatility in the lira currency and high inflation.

"Those who do this have lost the right to say 'trust in our economy".

The largest opposition party, the CHP, expressed harsh criticism of Erdogan's approach.

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