The Turkish president is firing Naci Agbal after just four months on the court following a surprising rise in interest rates.
Turkey’s president has fired the central bank governor, who in his four months in office had won praise from investors for raising interest rates and promising tighter monetary policy.
In a decree published in the Official Gazette on Saturday, President Recep Tayyip Erdogan announced the departure of Naci Agbal, a former finance minister.
He is being replaced by a banking professor who has advocated lower interest rates.
Agbal was brought in to lead the central bank after the Turkish lira hit record lows and inflation soared. In the months he was in office, Agbal had raised the reference rate by 875 basis points in total, restoring the central bank’s credibility after years of unorthodox policies damaged it.
Agbal’s most recent 200-point rise on Thursday brought the rate to 19 percent, higher than analysts expected.
The bank said a tight monetary policy would be maintained until inflation, which has reached 15.61 percent, is under control.
Erdogan is openly averse to high interest rates and claims that high interest rates cause inflation, which is contrary to accepted economic theory.
He has pressured the central bank to keep interest rates low to boost lending and growth. Critics say the central bank’s independence has been seriously affected by political pressure.
Erdogan’s decree on Saturday appoints Sahap Kavcioglu as the new head of the central bank. Kavcioglu is a banking professor and columnist in a pro-government newspaper advocating low interest rates.
He was previously a politician in Erdogan’s ruling party.
Previous central bank managers before Agbal burned up most of Turkey’s reserves in an effort to support the currency, while interest rates remained well below inflation.
A modest recovery in the value of the lira since Agbal’s appointment in November had created the impression that he had won Erdogan’s blessing to hold the rate high for some time to ward off inflation and help the lira recover.
But Erdogan’s aversion to high interest rates has remained consistent, saying only in January that he was “absolutely against” them.
“I know our friends are getting angry, but with all due respect, if I am president of this country I will keep saying this because I don’t think high interest rates will help the development of this country,” he said.