In a surprise decision, Turkish President Recep Tayyip Erdogan fired the central bank governor Naci Abgal on Friday night. Sahpa Kavcioglu, a critic of high interest rates, was appointed to the position. A change in the direction of monetary policy and strong market devaluation pressures on the Turkish lira are expected.
The monetary authority had raised the benchmark interest rate on Thursday by 200 basis points to 19%. Critics of high interest rates include President Erdogan and the new head of the central bank.
Abgal had taken office in November, at a time when the lira was suffering a sharp decline. USD / TRY was trading at 8.50. During the Abgal period, the central bank raised the interest rate by 875 basis points and tried to restore confidence with investors.
He is the third governor that Erdogan fires in a year, in a further blow to central bank independence. Other types of policies are now expected, which could begin with a reversal of the recent rate hike, according to speculation.
The beginning of the week is expected to be moved and Kavcioglu may be forced to introduce measures to calm the waters. On Friday, USD / TRY had closed at a low in almost a month, after falling 4% in two days.
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