Turkey sacks governor of central bank on presidential decree

Istanbul, March 20 (08:58 AM PKT) (AFP/APP): Turkey fired the governor of its central bank and replaced him with economist and former ruling party lawmaker Sahap Kavcioglu, according to a presidential decree published late on Friday, in a move likely to raise concerns over the bank’s independence.

Former finance minister Naci Agbal, seen as a market-friendly figure, had only been in the position since November, when he was appointed by President Recep Tayyip Erdogan as part of an overhaul of his economic team. No official reason was given for his sacking, but his dismissal comes after the central bank sharply hiked its main interest rate by a greater-than-expected 200 basis points on Thursday, from 17 to 19 percent.

Erdogan is a strong opponent of high interest rates and once called them the “mother and father of all evil”. Economists blame his unorthodox belief that high interest rates cause inflation — instead of slowing it down — for many of Turkey’s current economic problems. Erdogan wants to bring the annual inflation rate down to under 10 percent by the end of next year, and to five percent by the time he is next scheduled to face an election in 2023.

Kavcioglu, who writes an economy column in the pro-government Yeni Safak daily, suggested in a February column that the central bank should not insist on a high interest rate policy, because it would lead to high inflation. He is the fourth central bank head appointed since July 2019.

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