Erdogan Dismisses Central Bank Governor, Replaces Him With His Deputy

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Murat Cetinkaya’s four-year term was due to end in 2020.

Turkish President Recep Tayyip Erdogan has unexpectedly removed Murat Cetinkaya as central bank governor, reported Bloomberg.

According to a presidential decree in Official Gazette, deputy governor Murat Uysal was named as a replacement.

The shock ouster could reignite investors’ concern about the central bank’s independence and may derail a rally in the lira that started at the beginning of May. The decision comes days after Turkey’s real rate soared to a world topping 8.3 per cent as inflation slowed by more than expected, giving policy makers room to start an easing cycle.

The president has chastised the central bank frequently for keeping borrowing costs elevated. Last month, he complained that while the US Federal Reserve is moving closer to lowering interest rates, the policy rate in Turkey is 24 per cent.

Erdogan is using the powers granted to his office after last year’s general election, which transformed the political system into an executive presidency. The first batch of presidential decrees issued under the new rules last July included a change that allowed Erdogan to name central bank governors—an appointment that previously required the support of the cabinet.

Uysal, the deputy governor since June 2016, said he would continue to implement monetary policy independently, in line with his mandate and authority.

Cetinkaya, appointed governor in April 2016, was criticised for acting too slowly to tighten monetary policy during a currency rout in August. He then showed resolve in the face of market turmoil, increasing the benchmark interest rate by 625 basis points in September and holding it ever since.

Despite winning praise for delaying monetary easing, Cetinkaya also came under fire about the lack of transparency over recent volatility in the bank’s reserves, prompting concerns that the monetary authority was using its assets to prop up the lira before municipal elections earlier this year.