Published: Mon, July 08, 2019
Markets | By Erika Turner

Turkey’ President Erdogan ousts central bank governor Cetinkaya amidst economic crisis

Turkey’ President Erdogan ousts central bank governor Cetinkaya amidst economic crisis

Turkish President Recep Tayyip Erdogan has fired the Central Bank's Governor without giving an official reason, as policy differences between the government and the bank reportedly deepened in the face of an economic slump. Turkish media had speculated in recent days of a pending discharge Cetinkayas, because he refused to lower interest rates.

But the central bank raised the base interest rate to 24 percent from 17.5 percent previous year in order to control inflation.

Governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal, a presidential decree published early on Saturday in the official gazette showed. Mr Erdogan's public stance on interest rates - and perceived political interference with the central bank - was credited by many with the fall in the lira's value.

Two other government sources told Reuters that differences between the government and the governor over the conduct of monetary policy have deepened in the past few months.

'The goal of removing the central bank governor is clear: print money and lower the interest (rate) but the governor can not be sacked except for the reasons specified in its law. He had described the interest rates as the "mother and father of all evil" and claimed that high interest rates cause inflation and that lowering them will improve growth.

Uysal, who had served as deputy governor since June 2016, will hold a press conference in the coming days, the bank said.

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The Turkish Central Bank will also in future be independently assured her new boss on Saturday on the website of the Institute.

However, the Erdogan-led government was not available to immediately deliver a response.

The central bank's next policy meeting is scheduled to be held on July 25.

Despite winning praise for delaying monetary easing, Cetinkaya also came under fire about the lack of transparency over recent volatility in the bank's reserves, prompting concerns that the monetary authority was using its assets to prop up the lira before municipal elections earlier this year.

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

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