Erdogan Rids Turkey’s Central Bank of Opponents to Rate Cuts

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Erdogan Rids Turkey’s Central Bank of Opponents to Rate Cuts

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(Bloomberg)-14/10/2021

Turkish President Recep Tayyip Erdogan fired three members of the central bank’s interest-rate setting committee in a midnight decree, driving the lira to an all-time low.

Deputy governors Semih Tumen and Ugur Namik Kucuk were removed from their posts, along with Monetary Policy Committee member Abdullah Yavas, according to the decree. Erdogan appointed Taha Cakmak as deputy governor and Yusuf Tuna as an MPC member.

The changes followed a meeting late Wednesday between Erdogan and Governor Sahap Kavcioglu, people familiar with the discussion said. Kucuk was the only member of the committee who voted against Kavcioglu’s interest-rate cut last month, according to people with knowledge of the matter. Yavas didn’t vote because he had contracted Covid-19 in the U.S., where he lives.

The changes rid the committee of members who disagreed with Erdogan’s calls to continue cutting interest rates, according to people familiar with the matter.

Kavcioglu was appointed by Erdogan to lead the central bank in March, replacing his hawkish predecessor Naci Agbal. Last week, Erdogan’s office refuted a media report that said Erdogan is “cooling” on keeping Kavcioglu as governor.

Erdogan has described himself as an “enemy” of interest rates, espousing the theory that cutting borrowing costs will lead to slower inflation. The inflation rate was 19.6% in September, when Kavcioglu reduced the benchmark interest rate by 100 basis points to 18%.

The Erdogan-Kavcioglu meeting came after the lira slipped to a record low on Wednesday, extending its losses to almost 5% against the dollar since the governor delivered his surprise cut on Sept. 23.

The Turkish presidency posted a picture of the two men together on Twitter after the meeting. Erdogan’s office described the conversation as “positive.” The presidency also said the two men discussed the general economic situation.

The central bank declined to comment on the details of the meeting.

The lira fell as much as 1.1% to a fresh record of 9.1883 per dollar in early trading on Thursday.

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