Turkish lira hits record low after Erdogan fires central bank officials

The Turkish lira hit a record low overnight after President Recep Tayyip Erdogan ordered another round of layoffs at the country’s central bank.

In an overnight decree published hours after he met Sahap Kavcioglu, the bank’s governor, Erdogan deposed two deputy governors.

One of them, Ugur Namik Kucuk, was the only member of the bank’s eight-member monetary policy committee to oppose a rate cut that shocked international investors last month, according to two people familiar with the matter.

“He was the one who voted against the rate cut decision, so it’s a shame for him and for the country,” said an Istanbul banker.

Kucuk also opposed the controversial policy of selling the bank’s foreign exchange reserves in a doomed bid to support the lira, the banker added. The policy started at the beginning of 2019 and continued until the end of last year.

The second sacked vice governor, Semih Tumen, had been the subject of reports that he could be appointed to take over from Kavcioglu.

The president also ousted Abdullah Yavas, a longtime member of the monetary policy committee who had been criticized in the Turkish media for living in the US.

Already under pressure due to a strong US dollar and investor concerns about Turkey’s economic and foreign policy, the lira fell 1 percent in overnight trading to TL9.19 for the dollar. The coin suffered a bruise for a few years and has lost 59 percent of its value against the dollar since early 2018.

Erdogan, who has ruled Turkey for nearly two decades, has gained unprecedented control over the nominally independent central bank in recent years after taking steps to consolidate his own powers.

The president, an opponent of high interest rates, has clashed with a succession of governors because he wanted to prioritize high growth — including rising inflation — at all costs. He has fired the central bank chief three times since mid-2019 and fired a number of other officials.

The lira came under pressure last week after Reuters reported that Erdogan had lost confidence in Kavcioglu, who was appointed in March, even though he lowered the bank’s benchmark to 18 percent last month when annual inflation was at 19 percent.

The president’s chief of communications rejected that claim, and Wednesday’s meeting between Erdogan and Kavcioglu, announced by the president’s office, is likely to be interpreted as showing support for the governor.

Kucuk was a well-known figure in the international financial community. As a former chief economist at the private Garanti bank, he often took the lead in answering questions from foreign investors during monthly phone calls. Market participants were struck by his absence from a meeting that took place last week.

Taha Cakmak, a former official at Ziraat Bank and Turkey’s banking regulator, was appointed as the new deputy governor. Yusuf Tuna, an academic at Istanbul Commerce University, was appointed to the monetary policy committee.

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