Murat Cetinkaya, the head of the Turkish central bank, was sacked because of his refusal to cooperate with Turkish President Recep Tayyip Erdogan and finance minister Berat Albayrak, according to The Economist.
The lira was beginning to strengthen due to high interest rates and attempts at negotiations with the United States while inflation decreased to 16% from 25% last autumn when Cetinkaya was removed.
President Erdogan revealed, “We told him several times to cut interest rates at meetings on the economy. We said that if rates fall, inflation will fall. He didn’t do what was necessary.”
Although economists disagree with Erdogan’s proclamation that high lending rates were to blame for inflation, his decision to remove Mr. Cetinkaya signals that the president is undermining the central bank and taking control of monetary policymaking.
The lira fell 3% against the dollar early on July 8th and Turkey’s stock market index fell by 1.5%.
Wolfango Piccoli of Teneo, a risk-advisory firm, said that the removal of Mr. Cetinkaya weakened the central bank’s credibility, as he is the first central-bank boss to be sacked in Turkey since a military coup in 1981. Piccoli also noted that “any hopes of normalisation following the local elections were misplaced.”
Mr. Cetinkaya’s replacement, Murat Uysal, is expected to face economic sanctions from the United States over Turkey’s purchase of Russia’s S-400 air- and missile-defense system.