Turkish President Recep Tayyip Erdoğan sacked the governor of the central bank on Saturday as differences between them deepened over the timing of interest rate cuts to revive the recession-hit economy, Reuters reported.
Governor Murat Çetinkaya, whose four-year term was due to run until 2020, will be replaced by his deputy Murat Uysal, a presidential decree published early on Saturday in the Official Gazette showed.
No official reason was given for the sacking, but government sources cited Erdoğan’s frustration that the bank has kept its benchmark interest rate at 24 percent since last September to support the ailing lira currency.
The Turkish economy shrank sharply for the second straight quarter in early 2019 as a punishing currency crisis, persistent double-digit inflation and high interest rates took a toll on overall output.
Erdoğan wants lower rates to kick-start the economy.
“President Erdoğan was unhappy about the interest rate and he expressed his discontent at every chance. The bank’s decision in June to keep rates constant added to the problem with Çetinkaya,” a senior government official told Reuters, speaking on condition of anonymity.
Two other government sources told Reuters disagreement between the government and the governor over monetary policy has intensified in the past few months.
Çetinkaya hiked the benchmark interest rate by a total of 11.25 percentage points last year to support the lira, pushing it to the current 24 percent.
Erdoğan, whose son-in-law is the finance and treasury minister, repeatedly criticized the central bank for keeping rates high.
“The president and the finance minister demanded his resignation, but Çetinkaya reminded them of the bank’s independence and declined to resign,” one of the government sources said.
In a statement on Saturday, the central bank said it will continue to operate independently and that the new governor will make maintaining price stability the key goal.
“In his first remarks, Murat Uysal, said the communication channels would be used at the highest level in line with the price and financial stability goals,” the bank said, adding that Uysal would hold a news conference in the coming days.
Data earlier in the week showed Turkey’s consumer inflation slowed to its lowest level in a year in June, mainly due to a high base effect from the prior year and a drop in food prices, potentially paving the way for the country’s first interest rate cut since last year’s currency crisis.
Annual inflation hit a 15-year high in October above 25 percent, but later dipped and is currently running just over 15.5 percent.
The lira is down about 5 percent this year after having plummeted 30 percent last year during the currency crisis.