Erdoğan fires Turkey’s bank governor amid ongoing recession

Turkey has fired its central bank governor as policy differences between the government and the bank deepen in the face of an economic slump, volatility in the lira currency and high inflation.

Murat Çetinkaya, who had been serving as the governor since April 2016, was removed from the role and replaced by his deputy Murat Uysal, a presidential decree published on the official gazette on Saturday showed.

No official reason was given for the sacking, but markets have speculated over recent weeks that Çetinkaya’s position was becoming vulnerable because of his reluctance to cut rates.

The central bank has faced pressure from the president, Recep Tayyip Erdoğan, to lower interest rates in order to revive Turkey’s economy, which slipped into recession earlier this year.

It shrank sharply for the second straight quarter in early 2019 as a punishing currency crisis and soaring inflation and interest rates took a heavy toll on overall output.

“President Erdoğan was unhappy about the interest rate and he expressed his discontent at every chance. The bank’s decision in June to keep rates constant added to the problem with Çetinkaya,” a senior government official said.

“Erdoğan remains determined to improve the economy, and for that he made the decision to remove Çetinkaya,” said the official, who spoke on condition of anonymity.

“The difference of opinions between the governor and the ministers in charge of the economy has deepened in the recent period,” another government source told Reuters.

Çetinkaya raised the benchmark interest rate by a total of 750 basis points last year to support the ailing lira, pushing it to 24% by September, since when it has been left unchanged.

Erdoğan, whose son-in-law is the finance and treasury minister, repeatedly criticised the central bank for keeping rates high.

“The president and the finance minister demanded his resignation, but Çetinkaya reminded them of the bank’s independence and declined to resign,” a third source said.

In a statement on Saturday, the central bank said it would continue to operate independently and that the new governor would focus on maintaining price stability as its key goal.

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

“He will hold a press conference within this frame in the coming days,” the statement added.