Turkish President fires Naci Agbal after just four months at work after a surprise rise in interest rates.
The President of Turkey has fired the governor of the central bank, who in his four months in office had won the praise of investors for raising interest rates and promising stricter monetary policies.
In a decree published in the Official Gazette early Saturday, President Recep Tayyip Erdogan announced the departure of Naci Agbal, a former finance minister.
It needs to be replaced by a banking professor who has advocated for lower interest rates.
Agbal was introduced to head the central bank after the Turkish lira hit record lows and inflation soared. During his months in office, Agbal had raised the benchmark rate by a total of 875 basis points, working to rebuild the central bank’s credibility after being damaged by years of unorthodox policies.
Agbal’s most recent 200-point rise on Thursday brought the rate to 19%, which was higher than analysts expected.
The bank said it would maintain a strict monetary policy until inflation is controlled, which has reached 15.61 percent.
Erdogan is openly opposed to high interest rates, claiming that high rates cause inflation, which runs counter to the main economic theory.
It has pressured the central bank to keep rates low to fuel debt and growth. Critics say the central bank’s independence has been severely damaged by political pressure.
Erdogan’s decree on Saturday appoints Sahap Kavcioglu as the new head of the central bank. Kavcioglu is a professor of banking and a columnist in a pro-government newspaper where he has advocated low interest rates.
He previously served as a politician in Erdogan’s ruling party.
Earlier central bank managers before Agbal had burned most of Turkey’s reserves trying to support the currency, while rates remained well below inflation.
A modest recovery in the lira’s value since Agbal’s appointment in November had given the impression that he had earned Erdogan’s blessing to keep the rate high for a while to prevent inflation and help the lira recover.
But Erdogan’s unpleasantness toward high interest rates has remained constant, and he said until January that he was “absolutely against” them.
“I know our friends are angry, but with all due respect, if I am president of this country, I will keep saying this because I think high interest rates will not help develop this country,” he said.