Turkey Central Bank Removes Chief Economist, Key Officials
Erdogan has been a long-time advocate of an unorthodox theory that lowering interest rates will also bring inflation down.
(Bloomberg) -- Turkey’s central bank made the biggest overhaul to its senior management in recent years, a month after President Recep Tayyip Erdogan unexpectedly fired the bank’s governor.
At least nine high-ranking officials were removed on Thursday, including chief economist Hakan Kara, according to two officials with direct knowledge of the matter, who asked not to be named and cited an internal announcement.
The bank’s head of research, banking department chief, risk management chief and institutional transformation manager were also dismissed, the people said.
The dismissals appeared to focus on those former Governor Murat Cetinkaya hired from outside the bank, though no official reason was given. Some had been in post much longer, though, including Kara, who was described as “the backbone” of the central bank’s monetary research by Tim Ash, a strategist at BlueBay Asset Management in London.
“His departure is a huge, huge loss” for the bank, Ash said. “Hard to really understand.”
The central bank softened the blow to continuity with some of its new appointments. Out of the nine posts, at least five were filled by other central bank veterans, the people said. Cagri Sarikaya, who will head the research and monetary policy directorate, was the former deputy chief of the same department. The banking section will be headed by Ali Cufadar, formerly head of operations and money markets.
Kara’s position remains vacant with no announced plans for an immediate appointment.
Erdogan has criticized the bank for not cutting interest rates quickly enough, firing Cetinkaya on July 6 and replacing him with a former deputy. The bank’s new chief, Murat Uysal, cut borrowing costs by 425 basis points in his first meeting and signaled that more cuts would come.
Erdogan has been a long-time advocate of an unorthodox theory that lowering interest rates will also bring inflation down. Economic convention holds that the opposite is true.
The most recent reshuffle prompted criticism online. The moves “will not only result in bad monetary policy but will also lead to a situation where there will be no one left to say what is right,” Refet Gurkaynak, a professor of economics at Bilkent University in Ankara, said in a Twitter post.
However, markets have looked past recent Turkish upheaval, with assets buoyed in recent months by a global race to the bottom in interest rates to counter a slowdown in growth. That’s left Turkey with one of the highest real returns in major markets -- the central bank policy rate is 19.75%, compared with inflation at 16.7% in July.
The Turkish lira is the best-performing of the world’s most-traded currencies against the dollar in the past month, gaining 4.8%. It was little changed at 5.4778 to the dollar as of 10:07 a.m. on Friday.
Kara, the chief economist, did not respond to calls to his cellphone seeking comment. The central bank’s spokesman also was not available for comment.
--With assistance from Asli Kandemir.
To contact the reporter on this story: Onur Ant in Istanbul at oant@bloomberg.net
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Mark Williams
©2019 Bloomberg L.P.