Turkish President Recep Tayyip Erdogan removed the governor of the country’s central bank late on Friday, just after that official had presided over an interest-rate hik.
Naci Agbal had just again implemented a policy of tightening monetary policy in an effort to stem raging inflation in Turkey — now at a real rate of 32 per cent according to some economists. He had hiked interest rates to 19 per cent from 17 per cent, and received accolades from credit agencies and analysts across the world.
Former finance minister Naci Agbal, seen as a market-friendly figure, had only been in the position since November, when he was appointed by President Recep Tayyip Erdogan as part of an overhaul of his economic team.
“Agbal may be up for central banker of the year,” had commented Timothy Ash, senior analyst at Blue Bay Asset Management. His replacement with a longtime AK party loyalist is not likely to be viewed positively by the foreign investment community at a time when the country is in need of funds from abroad.
Erdogan has replaced him with economist and former ruling party lawmaker Sahap Kavcioglu, according to a presidential decree published late on Friday.
Kavcıoglu has served as the Deputy General Manager of state-owned Halk Bank, and then became a member of parliament for Erdogan’s AK Party.
Şahap Kavcıoğlu had criticised the central bank’s for its interest rate hikes and failure to respond to parliamentary attacks on the central bank’s use of reserves — which are now in negative territory.
Erdogan is a strong opponent of high interest rates and once called them the “mother of all evil”. He had spoken out against them on several occasions since Agbal first raised rates.
Economists blame Erdogan’s unorthodox belief that high interest rates cause inflation — instead of slowing it down — for many of Turkey’s current economic problems.
Kavcioglu is the fourth central bank head appointed since July 2019.
The Turkish lira had clawed back roughly 15 per cent of its value against the dollar since Agbal was appointed in November. It is currently at 8.63 to the euro; most forex markets do not operate on Saturday so any reaction to the move in trading will not take place until Sunday evening.