Turkish President Recep Tayyip Erdogan has taken the unusual and potentially dangerous to the economy step of firing the governor of the supposedly independent central bank due to a dispute over interest rates. Murat Cetinkaya who had been in the position since April 2016 has been replaced by his deputy.
Turkey’s Ex-central bank governor Murat Cetinkaya
Editorial credit muhennak/ Shutterstock.
President Erdogan has been calling for interest rates to be lowered, describing them as the “mother and father of all evil”. He has argued that high-interest rates have caused inflation and low economic growth, however, the result has been a near 3% drop in the value of the Lira which will probably stoke inflation further, at least short term given their need to import so many staples. It may also hit GDP as national debt servicing costs could soar as the market loses confidence in the Central Banks independence. Further Turkey currently has a raft of major infrastructure projects underway or in the pipeline which could be jeopardized.
This is one move which could backfire badly.
