Factbox-Revolving door: Turkey’s last four central bank chiefs

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ISTANBUL (Businesshala) – Turkish President Tayyip Erdogan is losing faith in Sahup Kavioglu, his latest appointment as central bank governor, and the two have communicated little in recent weeks, three sources familiar with the matter said. told Businesshala.

FILE PHOTO: A logo of the Central Bank of Turkey (TCMB) is pictured at the entrance of the bank’s headquarters in Ankara, Turkey on April 19, 2015. Businesshala/Umit Bektas // File photo

Erdogan sacked Kavioglu’s predecessor less than seven months ago, and also fired two others over the past 2-1/2 years.

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Bullish trading has hurt the credibility of monetary policy, and left inflation high and the lira weak. Here is a history of the last four central bank governors:

Murat Setinkaya (April 19, 2016 – July 6, 2019):

Setinkaya’s initial months as governor in 2016 were the last when Turkey’s inflation rate has remained within the official target range of around 5%. During 2018 he faced mounting price pressures and the lira depreciating, which would result in a full-blown currency crisis, a diplomatic dispute over the release of a US chaplain, the threat of US sanctions and emerging concerns over Erdogan’s influence on monetary policy. was inspired by. .

Analysts said Setinkaya was too slow to deal with the crisis. By the time he raised the key policy interest rate to 24% in September of 2018, the damage had been done: the economy was headed for a deep recession that would end years of strong economic growth that crippled Erdogan’s leadership. came to define Since 2003.

He nevertheless held policy steady and brought a sharp decline in annual inflation through much of 2019. Erdogan, a self-described foe of interest rates and eager for incentives, ousted them in the early hours of Saturday with a notice in the Official Gazette. . Others will be fired in the same abrupt manner.

Murat Uysal (July 6, 2019 – November 7, 2020):

A few weeks after becoming governor, Murat Usal – who was Setinkaya’s deputy – began an aggressive easing cycle, reducing the policy rate to 8.25% in 2020 from 24%. The cuts combined with a spurt in state-bank loans helped ease financial stress as the coronavirus pandemic hit. But with the return of inflation, the USAL reversed course and began tightening again in its final few months at the central bank.

Usal – a former private sector banker and gold trader, together with the then Finance Minister Berat Albayrak oversaw an unconventional and risky foreign exchange intervention policy in 2019 and 2020 that severely reduced the bank’s hard currency reserves. done.

The interventions were made by state banks and backed by the central bank through swaps, and were meant to stabilize the troubled lira. But the $128 billion in sales made the country more vulnerable to the balance-of-payments crisis, analysts said, and Uysal had little success securing relief swaps with foreign central banks.

NACI AGBAL (November 7, 2020 – March 20, 2021):

A former finance minister and longtime member of Erdogan’s AK party, Agbal took the reins in Turkish politics over an explosive weekend. A day after the appointment, Erdogan’s son-in-law Albayrak announced his resignation as finance minister with a message on Instagram. Businesshala later reported that Agbal met with Erdogan a few days ago to warn that the Albayrak-Uysal policy of FX interventions had weakened central bank reserves.

Agbal quickly emerged as a respected inflation hawk and his short tenure, dominated by aggressive rate hikes, is where Usal left off. The lira rallied in response and some foreign investors flocked back to Turkish assets after years of fleeing.

Agarbal last raised rates to 19%, days before he was fired early on Saturday morning. Businesshala later reported that Erdogan ousted Agbal in part because he was upset with the governor’s internal bank review, which was a costly FX intervention involving his son-in-law.

Sahup Kavioglu (since March 20, 2021):

An ex-banker who was not well known among mainstream economists, Cavioglu’s arrival at the bank was accompanied by a sharp market sell-off in which the lira lost 15% of its value before recovering some losses. His previous column in a pro-government newspaper shows that he shared Erdogan’s unconventional view that high rates cause inflation, so investors prepared for an immediate cut. Yet as inflation continued to rise and the currency fluctuated, Cavioglu kept rates stable through the summer.

But with Erdogan publicly promising lower rates and inflation, Cavioglu pivoted in September. He began to give dovish signals and urged investors to focus on a lower, core inflation measure, leading to a surprise 100 basis-point rate cut at the end of the month that sent the lira to new all-time lows. Gave.

Reporting by Jonathan Spicer; Editing by Toby Chopra


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