Turkish C.Bank chief sacking hits lira
Print Edition
The Turkish currency plummeted against the US dollar yesterday after President Recep Tayyip Erdogan fired the central bank governor over the weekend for hiking interest rates.
The lira was trading around 7.9 against the dollar 鈥 nearly 10 percent down from Friday鈥檚 close. It had been weaker earlier yesterday at 8.4 per dollar but recovered some of it losses after Finance Minister Lutfi Elvan assured markets Turkey was committed to free market rules and to a liberal currency exchange regime.
Erdogan, who advocates keeping interest rates low to tame inflation, unexpectedly fired Naci Agbal with a decree on Saturday, just four months after he took office. He replaced Agbal with a banking professor who has argued for lower interest rates.
Agbal, a respected former finance minister, was brought in to lead the central bank after the Turkish lira hit record lows and inflation soared. In his months in office, Agbal hiked the benchmark rate a total of 875 basis points, working to rebuild the credibility of the central bank after it was damaged by years of unorthodox policies.
Agbal鈥檚 most recent hike of 200 points on Thursday took the rate to 19 percent, higher than analysts expected. The bank said tight monetary policy would be maintained until inflation 鈥 at 15.61 percent 鈥 was brought under control.
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