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Erdoğan says Turkey could face problems if central bank not overhauled: report

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President Recep Tayyip Erdoğan said Turkey could face serious problems if its central bank is not completely overhauled after the dismissal of Governor Murat Çetinkaya, Reuters reported, citing the Turkish media.

A presidential decree on Saturday showed Çetinkaya, whose four-year term was due to run until 2020, had been replaced by his deputy Murat Uysal, reigniting concerns about political interference in monetary policy.

No official reason was given for the sacking, but government sources cited Erdoğan’s frustration that the bank had kept its benchmark interest rate at 24 percent since September to support the ailing lira, even as the economy slipped into recession.

Erdoğan told reporters on his airplane returning from a trip to Bosnia that Çetinkaya had made decisions for which a high price was paid and that he had not inspired market confidence, the Habertürk daily said.

“The central bank is the most important element in the economy’s financial pillar,” Erdoğan said. “If we do not revise it completely, if we don’t put it on solid foundations, we may face living with serious problems.”

“Most importantly, he did not inspire confidence in markets. His communication with markets was not good,” he added.

Erdogan, a frequent critic of high interest rates, has often called for lower rates to boost the economy, which shrank 2.6 percent in the first quarter, after a slide of 30 percent in the lira last year against a background of soaring inflation.

The lira, which weakened after Saturday’s move, was unchanged at 5.73 against the dollar after Erdoğan’s latest comments. Analysts think the central bank could start easing monetary policy at a July 25 meeting.

Erdoğan said he emphasized stability and decisiveness in steps on financial issues and that each time the bank’s rate-setting Monetary Policy Committee (PPK) met there was always uncertainty about what would emerge.

He said Çetinkaya had cut the number of PPK meetings each year, with eight this year. Before the policy change, the meetings were held every month.

“They did not ask us about these things, they did them of their own accord,” Erdoğan said, adding that Çetinkaya had also made organizational changes to the bank, by setting up directorates.

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