Abu Dhabi, UAESunday 25 October 2020

Turkey's President Recep Tayyip Erdogan sacks central bank governor amid rate tensions

Murat Cetinkaya ignored president's repeated calls for lower interest rates to boost ailing economy

Murat Cetinkaya's four-year term as Turkey's central bank governor was to end in 2020. Reuters
Murat Cetinkaya's four-year term as Turkey's central bank governor was to end in 2020. Reuters

Turkey's President Recep Tayyip Erdogan has sacked the governor of the central bank and replaced him with his deputy, after months of tension over high interest rates.

Murat Cetinkaya, who was appointed to the post in April 2016, has been replaced by Murat Uysal, according to a presidential decree published in the official gazette on Saturday. It gave no reason for the change.

There had been speculation that Mr Cetinkaya could be replaced amid disagreements with the government on cutting interest rates.

Mr Erdogan has repeatedly railed against high interest rates and called for them to be lowered in a bid to stimulate growth. He once called high rates the "mother and father of all evil".

Turkey's main interest rate is 24 per cent after the bank under Mr Cetinkaya made an aggressive rate hike of 625 basis points last September following a currency crisis in August.

Last month, Mr Erdogan said high interest rates harmed Turkey.

"I agree on the independence of the central bank but let me put it very clearly that I am against interest [rate] policies and above all, high interest rates," he said.

The weakening economy contributed to Mr Erdogan's Justice and Development Party (AKP) losing Ankara and Istanbul in recent local elections, in what was a stinging rebuke to the ruling party after more than a decade and a half in power.

Economic columnist Ugur Gurses said that the central bank chief was sacked with the goal of lowering rates.

"As I predicted, Ankara is swiftly taking an adventurist path after losing the election," he wrote on Twitter.

"The goal of removing the central bank governor is clear: print money and lower the interest [rate] but the governor cannot be sacked except for the reasons specified in its law. A presidential decree is not above law."

Mr Uysal, the new governor, said he would continue to use monetary policy tools "independently" while remaining focused on ensuring price stability as his "main aim", according to a central bank statement.

He had served as deputy governor since June 2016.

The change of central bank chief came after markets closed on Friday.

Turkish inflation fell to 15.72 per cent in June from 18.71 per cent in May, official statistics showed on Wednesday, the lowest rate in nearly a year.

The opposition Republican People's Party (CHP) spoke out against the removal of Mr Cetinkaya, with spokesman Faik Oztrak accusing the president of interfering in the independence of the central bank.

"Those who do this have lost the right to say 'trust in our economy'. The Turkish central bank is a hostage in the hands of the Palace. Full stop," he wrote on Twitter.

The main opposition party also pointed to concerns that the move could undermine the bank's credibility.

"Those who removed the central bank governor overnight have lost the right to demand confidence in the country's economy. The central bank is a captive being kept in the palace," said the main opposition party spokesman Faik Oztrak, referring to Erdogan's office.

Updated: July 6, 2019 06:59 PM

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