Turkey’s President Fires Central Bank Governor by Decree

By Staff, Agencies

Turkey’s president has fired the central bank governor, who in his four months in office had won the praise of investors for hiking interest rates and promising tighter 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. He is to be replaced by a banking professor who has argued for lower interest rates.

Agbal was brought in to lead the central bank after the Turkish lira hit record lows and inflation soared. In his months in office, Agbal had hiked the benchmark rate a total of 875 basis points, working to rebuild the credibility of the central bank after it was damaged by years of unorthodox policies.

Agbal’s most recent hike of 200 points on Thursday took the rate to 19 percent, which was higher than analysts expected. The bank said tight monetary policy would be maintained until inflation, which has hit 15.61 percent, was brought under control.

Erdogan is openly averse to high interest rates, claiming high rates cause inflation, which stands in opposition to mainstream economic theory. He has pressured the central bank to keep rates low to fuel borrowing and growth. Critics say the independence of the central bank has been severely damaged by political pressure.

Erdogan's decree on Saturday appoints Sahap Kavcioglu as the new central bank head. Kavcioglu is a banking professor and a columnist in a pro-government newspaper where he has argued for low interest rates. He previously served as a lawmaker in Erdogan’s ruling party.

Kavcioglu will be the fourth governor to lead the bank in two years.

Agbal, in a tweet, thanked the president for having appointed him to his previous posts and said: "I’d like to also extend my gratitude for my removal." He made no further comment.