Home / Business / Turkey’s Erdogan reportedly fired his central bank chief for refusing to slash interest rates

Turkey’s Erdogan reportedly fired his central bank chief for refusing to slash interest rates

Turkey Turkish President Tayyip Erdogan SpeechREUTERS/Umit Bektas

  • Turkish President Recep Tayyip Erdogan reportedly removed the head of the country’s central bank for refusing to lower interest rates.
  • The comments were expected to add to concerns about monetary policy independence in the embattled economy.
  • Erdogan has repeatedly criticized the central bank for having kept its benchmark interest rate at 24% since last September, arguing that the approach was hurting the economy.
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Turkish President Recep Tayyip Erdogan reportedly removed the head of the country’s central bank for refusing to lower interest rates, adding to concerns about monetary policy independence in the embattled economy.

Erdogan removed Governor Murat Cetinkaya using a presidential decree Saturday, ending his term over a year before it was set to end in 2020. He was replaced by the central bank’s second-in-command, Murat Uysal, who is seen as a more dovish member of the central bank.

The government did not issue an official reasoning behind the removal. But according to the Turkish newspaper Hurriyet, Erdogan lamented to lawmakers that Cetinkaya had failed to listen to calls to lower interest rates. 

“We told him repeatedly in economy meetings that he should cut rates,” Erdogan was quoted saying in a meeting with the ruling AK party this weekend on Sunday, Reuters first reported. “We told him that the rate cut would help inflation to fall. He didn’t do what was necessary.”

“We weren’t on the same page,” Erdogan added.

Erdogan has repeatedly criticized the central bank for having kept its benchmark interest rate at 24% since last September, arguing that the approach was hurting the economy. Policymakers say those rates are necessary to prop up the Turkish lira, which dropped to historic lows last year amid a sprawling currency crisis

The central bank sought to reassure investors on Saturday, emphasizing that it would “continue to independently implement monetary policy instruments.” 

“In his first remarks, Murat Uysal said the communication channels would be used at the highest level in line with the price and financial stability goals,” the central bank said.

But the move to oust Cetinkaya came on top of a spate of concerns about central bank independence, which economists say is crucial for a stable economy. Erdogan has long drawn concern for his handling of the economy, backing unorthodox policies like cutting rates to stem inflation. 

The next policymaking meeting is scheduled for July 25. Inflation levels have edged lower after hitting a peak of 25% last year but remains in the double digits. 

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