Turkey’s President Removes Head of Central Bank

By Reuters

ImageMurat Cetinkaya, the governor of Turkey’s central bank, in 2016. He was abruptly fired on Saturday by the country’s president, Recep Tayyip Erdogan.
Murat Cetinkaya, the governor of Turkey’s central bank, in 2016. He was abruptly fired on Saturday by the country’s president, Recep Tayyip Erdogan.CreditCreditAdem Altan/Agence France-Presse — Getty Images

ANKARA, Turkey — President Recep Tayyip Erdogan removed the governor of Turkey’s central bank on Saturday as differences between them deepened over the timing of interest rate cuts to revive the economy.

The governor, Murat Cetinkaya, whose four-year term was due to run until 2020, will be replaced by his deputy, Murat Uysal, according to a presidential decree published early on Saturday in the official gazette.

No official reason was given for the move, but Mr. Erdogan has been openly critical of the central bank for keeping its benchmark interest rate at 24 percent since last September to support the country’s ailing currency, the lira.

Investors have been pulling their money out of the country, sending the value of the lira plunging. The value of the lira is down about 5 percent this year after falling 30 percent last year. High interest rates are meant to entice investors with enhanced rewards for accepting the risk of keeping their cash in Turkey.

The Turkish economy shrank sharply for the second straight quarter in early 2019. Inflation is running at about 19 percent, punishing both businesses and consumers.

Analysts think the central bank could start easing monetary policy at a meeting on July 25.

“The assumption is the new guy was hired because he will cut rates on demand from the presidential palace,” said Timothy Ash, senior emerging markets strategist at BlueBay Asset Management.

The removal of Mr. Cetinkaya comes just days before Turkey is expected to receive a delivery of Russian air defense systems, which could set off American sanctions. That, in turn, could put the lira under renewed pressure.

Mr. Cetinkaya raised the bank’s benchmark interest rate by a total of 11.25 percentage points last year to support the lira, pushing it to the current 24 percent.

In a statement on Saturday, the central bank said that it would continue to operate independently and that the new governor would 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 Mr. Uysal would hold a news conference in the coming days.

The main opposition party, the Republican People’s Party, whose candidate, Ekrem Imamoglu, just won election as Istanbul mayor, was critical of Mr. Erdogan’s move, saying it could undermine the bank’s credibility.

“Those who removed the central bank governor overnight have lost the right to demand confidence in the country’s economy,” said Faik Oztrak, a spokesman for the party. “The central bank is a captive being kept in the palace.”

Data earlier in the week showed Turkey’s consumer inflation slowed to its lowest level in a year in June, mainly because the rate in the prior year was already high and because of a drop in food prices. That could potentially pave the way for the country’s first interest rate cut since last year’s currency crisis.