The Turkish lira rose from a new record high on Friday after one of President Recep Tayyip Erdogan’s top aides dismissed claims the leader was about to fire his central bank governor for the fourth time. three years.
The currency fell around 1% to 8.97 TL against the US dollar, with Reuters reporting that Erdogan lost confidence in Sahap Kavcioglu, even after the governor bowed to pressure to cut the interest rate by bank reference last month. The news agency, citing three sources, said Erdogan – a notorious opponent of high interest – was frustrated that a rate cut had been delayed until September and not implemented sooner.
But the pound retraced part of its decline, strengthening 0.6%, as Fahrettin Altun, Erdogan’s communications director, called the reported allegations “false news” and “lies” about Twitter.
Erdogan, who has ruled Turkey for nearly two decades, grapples with growing public discontent with his handling of the country’s economy.
The annual inflation rate hit nearly 20% in September, five times the bank’s official target, with food prices accelerating even faster.
But the Turkish president believes, contrary to general economic conventions, that high interest causes high inflation rather than slowing it down. He has argued over monetary policy with a long line of central bank governors.
Speaking on Thursday, Erdogan reiterated his commitment to lower interest rates. “We are going to lower inflation and interest as we have done before,” he said. “But it can’t happen in one day.”
Kavcioglu, a former ruling party MP, was appointed in March this year. His predecessor, former finance minister Naci Agbal, was sacked after just four months in office after trying to control inflation through a succession of rate hikes.
The current governor stunned international investors by slashing the bank’s benchmark interest rate by 1 percentage point last month to 18%. The move sparked another rush on the pound, which has depreciated sharply over the past decade. One dollar bought 1.77 TL at the end of October 2011.
Still, some analysts and market participants have speculated in recent weeks that Kavcioglu could be replaced by Semih Tumen, a former central bank official who returned to the institution in May as deputy governor.
A prominent Turkish banker downplayed the prospect of Tumen, who holds a PhD in economics from the University of Chicago, to take over. “Yes [a change of governor] come, [the replacement] will be someone much more obedient and stupid.