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Turkish President Recep Tayyip Erdogan has surprisingly sacked the head of the central bank Murat Uysal in view of the ongoing currency crisis. He appointed former finance minister Naci Agbal as his successor by decree.
The Turkish lira fell back to an all-time low against the dollar on Friday. On Friday evening 8.52 Turkish lira was exchanged for one dollar. Since the beginning of the year, the Turkish currency has lost nearly 30 percent against the dollar.
Erdogan only promoted Uysal from deputy chief to central bank chief in July 2019, after he fired his predecessor Murat Cetinkaya in a dispute over what he considered too high interest rates. Uysal then started cutting interest rates. In September, however, the central bank surprisingly raised interest rates to combat the weakness of the lira: from 8.25 to 10.25 per cent. It was the first rate hike in about two years.
Erdogan is considered an enemy of interest
The surprising change at the top of the central bank is notable because doubts have arisen over the political independence of the central bank in the past. President Erdogan had made it clear several times that he was not interested in higher benchmark interest rates. He hopes that cheap credit will fuel economic growth. Just last weekend he declared that Turkey is fighting a “devilish triangle of interest rates, exchange rates and inflation”.
Gross domestic product in emerging markets, which has been booming for a long time, fell 11% from April to June in the face of the krona crisis. Among other things, the major tourism industry has clearly felt the virus pandemic.
Recently, Turkey’s relationship with major trading partners in the European Union came to a head after Erdogan attacked his French counterpart Emmanuel Macron. Erdogan accused Macron of Islamophobia in the Mohammed cartoon dispute, described the French president as a disease and called for a boycott of French goods.
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