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Turkey fires central bank chief as policy differences deepen amid economic malaise

Murat Cetinkaya, former governor of Turkey's central bank [Flickr]
Murat Cetinkaya, former governor of Turkey's central bank [Flickr]

Turkey on Saturday fired its central bank governor as policy differences between the government and the bank deepened in the face of an economic slump, volatility in the lira currency and high inflation, Reuters reports.

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

No official reason was given for the sacking, but markets have speculated over recent weeks that Cetinkaya may be pushed out by the government because of his reluctance to cut rates.

The central bank has faced pressure in the past from President Tayyip Erdogan to lower interest rates to revive an economy which slipped into recession earlier this year.

The Turkish economy 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.

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“President Erdogan 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 Cetinkaya,” a senior government official told Reuters.

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

Two other government sources told Reuters that differences between the government and the governor over the conduct of monetary policy have deepened in the past few months.

“The difference of opinions between the governor and the ministers in charge of the economy has deepened in the recent period,” said one of the sources.

Cetinkaya had hiked the benchmark interest rate by a total of 750 basis points last year to support the ailing lira, pushing it to 24 per cent by September where it has since been left unchanged.

Erdogan, 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 Cetinkaya reminded of the bank’s independence and declined to resign,” the other source said.

In a statement on Saturday, the central bank said it will continue to operate independently and that the new governor will 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.

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