In the midst of a crisis, Erdogan fires the head of the Central Bank (again …)

Murat Uysal, governor of the Turkish central bank, was dismissed by President Erdogan after 16 months from the beginning of his four-year term, without any official explanation, by decree, but apparently because he dared to retouch upwards, from 8.25% to 10.25%, in an attempt to limit the devaluation of the Turkish Lira, which has been increasingly in monetary crisis in the last year:

In July 2019, when the Turkish economy was in free fall and inflation was skyrocketing following a historic currency crash in mid-2018, and shortly after Erdogan had become the de facto leader if not the ruler of Turkey , the Turkish president had a brilliant idea: to take decades of monetary orthodoxy and turn them upside down. Faced with a situation of slowing growth, runaway prices and a falling lira, Erdogan conceived what is now known as "Erdoganomica" or the bizarre epiphany according to which to fight inflation and prevent the collapse of the currency, Turkey had to do was the opposite of what any other country in its position would have done and cut rates. In his logic, the link of cause and effect was canceled, because according to him it is the high interest rates that cause inflation and not vice versa.

To implement this truly "unique" view, Erdogan fired the then governor of the Turkish Central Bank, Murat Cetinkaya, who had refused to cut rates at a time when Turkish inflation was on the rise, and replaced it with an obedient little dog, Murat Uysal.

"We fired the previous central bank governor because he didn't listen to us and we decided to move on with our new friend," Erdogan said in a speech in the Ankara parliament on Tuesday. Erdogan said he told the new governor that "we will lower interest rates".

It worked for a while: Uysal made a larger-than-expected cut at multiple times, however starting with a 16% reduction in interest rate in the first month of his appointment.

Unfortunately, Uysal also "betrayed" Erdogan and raised interest rates. He also tried, poor man, to increase the hard currency reserves to defend the Turkish lira

At this point the Turkish central bank is only a branch of the government, so much so that the governor is a former finance minister, Naci Agbal, What will happen to the lira tuca? left to itself, it embarks on a path of poorly controlled devaluation, and Erdogan could soon be closer, not only politically, to Maduro. The developments in the international situation and in the numerous conflicts involving him will also be important in this.

Thanks to our Telegram channel you can stay updated on the publication of new articles of Economic Scenarios.

⇒ Register now

The article In the midst of a crisis, Erdogan fires the head of the Central Bank (again…) comes from .

This is a machine translation of a post published on Scenari Economici at the URL on Sat, 07 Nov 2020 08:54:11 +0000.