Turkey’s economy is facing fresh turmoil following the surprise ouster of central bank governor by President Recep Tayyip Erdogan, which added another chapter to years of unpredictable economic policy that frightened foreign investors and possibly sowed the seeds of a financial crisis. .
Last Friday, Mr Erdogan replaced Naci Agbal with Sahap Kavcioglu, a former member of parliament for the Erdogan Justice and Development Party, who made public the president’s demands for lower interest rates, despite inflation reaching 15.6% annually in February.
Mr Erdogan, who has fired three central bankers in less than two years, prefers low rates as part of a strategy to encourage growth.
He opposed the policies set by Mr Agbal, who raised interest rates in an effort to fight inflation and help Turkey withdraw from the crisis. Mr Agbal’s policies have encouraged investors to sell billions of dollars back in the country since he was appointed in November.
Mr Agbal’s dismissal on Monday triggered one of the worst sales of Turkish-denominated assets in a single day, as investors reduced their exposure to the currency. The pound fell 7.5% against the dollar in one day. Mr Kavcioglu tried to calm markets by saying he would cut inflation, but did not say whether interest rates would change.