Turkish Central Bank, Naci Ağbal

Erdoğan dismisses governor of Turkish Central Bank

Known for his strong stance against inflation, Ağbal has been criticised for keeping in Turkey one of the highest interest rates in the world.

Turkish President Tayyip Erdoğan abruptly dismissed the governor of the Turkish Central Bank (TCMB), Naci Ağbal, less than 48 hours after he approved a new interest rate hike to combat the rise in prices in Turkey, according to a Presidential decree published in the Official Gazette of the Republic early this Saturday.

The decree, which does not explain the reasons for the dismissal, names Şahap Kavcıoğlu as Ağbal’s replacement; Kavcıoğlu is an economist by profession, former MP for the AKP party and finance minister between 2015 and 2018, and has held various senior positions in public banks of the country such as Halkbank or Vakıfbank. It remains to be seen what impact the measure will be on the markets, despite the economic reforms recently announced by Erdoğan.

Kavcıoğlu has openly criticised Ağbal’s policies for considering that maintaining one of the highest interest rates in the world while in the rest of the countries they are practically at zero, seriously damages the Turkish economy. A rise in interest “indirectly causes inflation to rise,” he wrote last month in an opinion in a well-known Turkish newspaper, echoing Erdoğan’s opinion on this issue.

Ağbal’s dismissal comes less than 48 hours after the Central Bank approved a new 200 basis point hike in its one-week benchmark interest rate to reach 19%, double expected by analysts: a measure defended by the entity to face inflation and the devaluation of the Turkish lira, while it announced further increases in the future until the rise in prices is subdued.

Ağbal wanted to reduce inflation to 5% by 2023

Ağbal was appointed as the new governor of the Central Bank last November after the removal of Murat Uysal; known for his inflexible stance on inflation, he had set a goal of reducing it to 5% by 2023; since his arrival in office, the TCMB had raised interest rates by 875 basis points.

Despite his sudden dismissal, the now former governor of the Turkish Central Bank thanked President Erdoğan through Twitter for his confidence in him for the post, despite its brevity: “I would like to thank the President for all the posts I have been elected for, including governor of the Central Bank. I would like to express my gratitude for the termination of my post today. I hope that everything is for the best,”Ağbal wrote.