Turkeys Erdogan overhauls monetary policy committee, lira hits record low

Updated: October 14th, 2021 03:05 PM IST

Turkey’s President Tayyip #Erdogan dismisses three central bank monetary policy committee (MPC) members, appointing two new members in their place, the country’s Official Gazette says, sending the #lira to record lows.

Turkeys Erdogan overhauls monetary policy committee, lira hits record low

Turkey’s President Tayyip Erdogan dismissed three central bank monetary policy committee (MPC) members on Thursday, appointing two new members in their place, the country’s Official Gazette said, sending the lira to record lows.

Analysts viewed the move as fresh evidence of political interference by Erdogan, a self-described enemy of interest rates who frequently calls for rate cuts.

The lira weakened to a record low of 9.1900 against the dollar after the announcement, a loss of one percent on the day. It has weakened about 19 percent so far this year, driven by concerns about monetary policy.

Last month, the central bank unexpectedly cut its key rate to 18 percent from 19 percent despite annual inflation of nearly 20 percent, sparking a new selloff in the lira, which was also hit by the dollar strengthening against other currencies.

The MPC overhaul came after the presidency said on Wednesday evening that Erdogan had met Central Bank Governor Sahap Kavcioglu, publishing a photo of Erdogan standing next to him.

A source told Reuters that both Yavas and Kucuk had lately opposed some decisions taken by the MPC, while Kucuk had also been against reserve sales to support the lira in previous years.

“Kucuk had a sentence at the MPC that is still remembered at the bank: ‘The lira’s stability, reputation and the price stability that comes with these are prerequisites for economic growth and development based on productivity. Growth provided by other means will not be permanent,’“ the source said.

“‘If you keep the interest rate lower than where it needs to be today, the level you have to raise the interest rate to tomorrow will be higher than the level it needs to be today,’“ the person quoted Kucuk as saying.

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