Murat Cetinkaya had refused to cut interest rates
Turkish President Recep Tayyip Erdogan has fired the governor of the central bank and replaced him with his deputy.No official reason was given for the sacking of Murat Cetinkaya, who had held the position since April 2016.However, it comes amid reports of disagreements over interest rates, which the government wants to lower in a bid to boost economic growth. The announcement has prompted renewed concern over the central bank’s independence.Mr Erdogan has called for interest rates to be lowered, describing them as the “mother and father of all evil”. He has claimed that high interest rates cause inflation and believes that lowering them will improve growth. But the central bank in September instead increased its benchmark interest rate from 17.5% to 24%, saying that doing so would help to battle inflation and boost the lira.A “tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement”, it said at the time. Turkey’s currency hit record lows in the past year, which has the effect of raising the prices for many everyday items. 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.It also raises the cost of Turkey servicing its debt, which was driven up by the president’s many major infrastructure projects, and that in turn has raised concerns of a potential economic crisis. And a modest recovery in the lira’s value so far in 2019 failed to protect Mr Erdogan’s party from some electoral fallout in this year’s local elections, in which he lost control of Istanbul.
Turkey’s lira slump explained
Turkey raises interest rates to 24%
Two government sources told Reuters news agency on Saturday that the disagreement over monetary policy had deepened in recent months. One said that Mr Erdogan and Finance Minister Berat Albayrak had privately demanded Mr Cetinkaya’s resignation, but he had refused, citing the central bank’s independence. Mr Cetinkaya – whose four-year term was due to end in 2020 – will now be replaced by his deputy, Murat Uysal.Some raised concerns over the bank’s independence following the announcement. “Removing the central bank’s governor in this manner will deal a big blow to its institutional structure, capacity and independence,” Ibrahim Turhan, a former deputy central bank governor, wrote on Twitter. “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.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.