Turkey’s Erdogan ousts central bank chief for refusing rate cuts
Ankara — Turkish President Tayyip Erdogan sacked the central bank governor for refusing the government’s repeated demands for rate cuts, Hurriyet newspaper on Sunday quoted Erdogan as telling a meeting with his party’s MPs.
Governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal, a presidential decree published on Saturday in the official gazette showed.
“We told him repeatedly in economy meetings that he should cut rates. We told him that the rate cut would help inflation to fall. He didn’t do what was necessary,” Erdogan was quoted as saying.
The daily Hurriyet said Erdogan gave his explanation for sacking Cetinkaya, almost a year before his term was due to end, during a consultation meeting in Istanbul with the members of his ruling AK Party.
“We weren't on the same page,” Erdogan said.
No official reason was given for the sacking, but government sources cited Erdogan’s frustration that the bank has kept its benchmark interest rate at 24% since last September to support the ailing lira currency.
In a written statement on Saturday Uysal said he would independently implement monetary policy instruments focused on achieving and maintaining the primary objective of price stability.
Despite the new governor’s assurance, critics say the move once again showed that Erdogan was in full control of the monetary policy, and that Turkey would witness a period of rapid rate cuts.
“The sacking of the governor of the CBRT by presidential decree shows that Erdogan is in charge of monetary policy,” said Wolfango Piccoli, of the London-based political risk consultancy Teneo. “The decision significantly undermines whatever credibility the CBRT had left. It also signals that overall institutional degradation continues unabated.”
Under Turkey's new executive presidency, which came into effect in 2018, Erdogan does not need cabinet approval to change the central bank governor.
A senior Turkish economist also said Erdogan’s surprise dismissal of Cetinkaya could further undermine perceptions of the bank’s independence.
“While the debate regarding the central bank’s independence continues, removing Cetinkaya, who apparently resisted some measures, and replacing him through an unusual method will only fuel this debate,” the senior economist said. “We will see how he can convince the markets for a rate cut at a time when the independence is increasingly doubtful.”
The central bank has kept its benchmark rate unchanged since it increased the rate by 625 basis points to 24% in September to prevent a full-blown financial crisis.
Several economists were already expecting a rate cut at a July 25 monetary board meeting as inflation fell to 15.7% in June, its lowest level in one year.
“Newspapers have cited Erdogan saying that Cetinkaya did not do what he was told on rates. It casts a shadow on Uysal, but he will be quite aggressive on rate cuts,” another Turkish economist said.