Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Turkey's Erdogan ousts central bank governor after steep lira slide

Economy Nov 07, 2020 09:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Turkish President Erdogan addresses members of his ruling AKP during a meeting in Ankara

By Orhan Coskun, Nevzat Devranoglu and Daren Butler

ANKARA/ISTANBUL (Reuters) - Turkish President Tayyip Erdogan fired central bank governor Murat Uysal on Saturday and replaced him with ex-finance minister Naci Agbal, acting after a 30% plunge in the lira currency's value to record lows this year.

The decision to replace Murat Uysal gives Turkey its fourth central bank governor in five years and could stoke longstanding criticism about political interference in monetary policy.

The presidential decree was announced in the early hours Saturday in Turkey's Official Gazette and gave no reason for the surprise move. But several officials close to the matter said Uysal was held responsible for the nosedive of the lira, the worst performer in emerging markets this year.

"The rise in the exchange rate really exceeded expectations very rapidly. Some steps were expected to have an impact, but that didn't happen," one senior official said.

Analysts said that while Agbal is a close Erdogan ally, he is seen as a capable manager who could take a more orthodox approach to policy. That could ease concerns that have driven Turks to snap up hard currencies at record levels.

"Uysal's leadership had been utterly disastrous. Agbal cannot be worse, surely. He had a reputation as a decent technocrat," Timothy Ash at BlueBay Asset Management said on Twitter. "Agbal is actually qualified for the job."

The lira has continued to slide on concerns over the central bank's depleted FX reserves, negative real rates, monetary independence, and the risk of Western sanctions over Turkish foreign and defence policies.

Analysts also fear U.S.-Turkish relations may come under more strain if Democrat Joe Biden defeats President Donald Trump in last Tuesday's closely fought election, where the vote count has not been completed but is tilting Biden's way.

Turkey, a G20 country and the largest economy in the Middle East, roared back from a recession last year on the back of surging domestic lending and state support for the lira - until it was hit hard by the COVID-19 pandemic.

Erdogan had appointed then-deputy governor Uysal to head the central bank in July 2019 after sacking predecessor Murat Cetinkaya, saying the bank had not cut interest rates to boost the economy.

'TYING' THE BANK'S HANDS

Erik Meyersson, senior economist at Handelsbank, said that while Uysal had taken the blame for Turkey's economic woes, it was Erdogan who was "tying" the bank's hands, adding that the post of central bank governor was "mere puppetry".

Erdogan, a self-described enemy of high interest rates, has repeatedly called for lower borrowing costs.

Last weekend, he said Turkey was fighting an economic war against those squeezing it in "the devil's triangle of interest and exchange rates and inflation".

The lira closed at 8.5445 against the dollar on Friday after touching a record low of 8.58, despite dollar weakness amid the uncertainty of the U.S. election outcome.

Agbal had been finance minister from 2015 until 2018, when he was appointed to head the directorate of presidential strategy and budget.

An official from Erdogan's AK Party said Agbal faced a "difficult test" at his new post but that he was a "strong name" who could help alleviate some of the pressure on the lira.

"We will see a stronger central bank governor," the official said, adding Agbal "will act smart".

He is not seen as someone who would accept political direction, the person added. "It is a difficult post, but steps to stop the rapid rise in the exchange rate must be taken."

The lira's slide, coupled with inflation stuck near 12%, well above the bank's target of around 5%, has ramped up pressure for tighter policy. Last month the central bank bucked expectations for a big rate hike and held policy steady at 10.25%, triggering sharp losses in the lira.

The bank, which also surprised markets a month earlier when it hiked rates, said it would stick with liquidity measures to tighten money supply. It raised the uppermost rate in its corridor, the late liquidity window, to 14.75% from 13.25%.

Opposition parties slammed Agbal's appointment, saying it strengthened Erdogan's influence and politicised the bank.

Deva Party Chairman Ali Babacan, an ex-minister under Erdogan who later founded a rival party, said Erdogan's executive presidency was responsible for Turkey's economies woes, not the central bank.

"Suddenly removing the central bank governor with a midnight operation and appointing someone else is nothing more than the reflection of poor management," Babacan said. "You cannot run from your responsibilities by replacing a bureaucrat who did nothing except what you said, by putting the blame on him."

Turkey's Erdogan ousts central bank governor after steep lira slide
 

Related Articles

Asia shares edge higher, wary of Fed words
Asia shares edge higher, wary of Fed words By Reuters - Aug 14, 2022

By Wayne Cole SYDNEY (Reuters) - Asian shares inched higher on Monday with investors anxious to see if Wall Street can sustain its rally as hopes U.S. inflation has peaked will be...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email