He said it in 2016, he confirmed it many times in recent years, launching a real purge against those members of the central bank of Turkey who dared to contradict him: the president of Turkey Recep Tayyip Erdogan is, as he himself said, “the enemy of interest rates”. And, of course, the enemy of Turkey’s central bank, which has turned itself into a presidential propaganda tool, with its independence repeatedly besieged by politics.
The umpteenth attack + was launched by Erdogan in the early hours of today, through the announcement of the dismissal of three central bank officials.
The names have been published in the Official Gazette: it is the two vice presidents of the central bank, Semih Toman and Ugur Namik Koçek and a member of the Monetary Policy Council, Abdullah Yavas: the latter was sent away less than five months after his appointment.
At the same time, the decision was made to appoint Taha Chanak for one of the two vacant positions of the vice presidency, and Youssef Tuna as a member of the Monetary Policy Council.
The reaction of the Turkish lira was immediate, capitulated to a record low against the dollar for the third consecutive session, at 9.18 lire per US dollar. Therefore, the bloodbath of the currency continues, which, due to the monetary policy practically in the hands of the Turkish president, pays the price of galloping inflation and Erdogan’s refusal to allow rates to be raised to remedy it. Quite the contrary: last month, according to several analysts of Erdogan’s interference, the institution cut its reference rates by 100 basis points to 18%, from the previous 19%, against an inflation rate that is approaching almost 20%. The surprise rate cut was announced by the institute’s current governor, Sahap Kavcioglu, fourth helmsman of the central bank since 2019: his three predecessors were all fired by the Turkish president, who did not like their monetary policy approach. . According to the analyst community, the cut was decided by Kavcioglu precisely in order not to unleash Erdogan’s anger, and consequently not to end up with the same fate as the other central bankers. But Kavcioglu also had to give a professional justification: and so, the explanation centered on the phrase that is common to several central banks, namely the one that affirms that the recent increase in inflationary pressures was caused by factors of a transitory nature. The bank also added the importance of not considering the impact that the shocks hitting the supply chain have on price increases, and to focus rather “on core inflation developments”.
“The move remains shocking, as confirmed by the initial negative market reaction – underlined Piotr Matys, senior forex analyst at InTouch Capital Markets, immediately after the announcement of the rate cut – Begin a cycle of monetary easing at a time in which inflation is about to end the year flat above official estimates, and justifying it with the slowdown in core numbers is a very risky move, which could prove counterproductive, given that a weaker lira will cause inflationary consequences “.
The outburst of pride of the current central bank governor did not last long: appointed in March after the torpedoing of the predecessor Naci Agbal, who he had dared to raise rates to 19%, in order to fight the inflation rate in Turkey, which a few months ago was 15.61%, and which today is almost 20%.
the central banker had dared to humiliate Erdogan, saying that a rate cut would be anything but guaranteed, and adding that he would monitor the trend of the one-week repo rate, thus adopting the same tool as Agbal to make his own rate decisions.
It should be noted that last week the Turkish Statistical Institute (TÜİK) released data on inflation measured by the consumer price index: the September figure rose by 19.58% on an annual basis compared to the 19.24% in August, slightly below the consensus of analysts, which had forecast a rise of 19.69%. On a monthly basis, inflation advanced by 1.25%.
The surge mainly affected the prices of food and non-alcoholic beverages, which jumped by 28.79%; boom also for the prices of furniture and household items, which flew by 23.7%. The prices of clubs, restaurants and hotels have also risen. But he commented on the data as follows:
“We believe that the temporary factors that are affecting the inflation outlook will weaken in the short term and that inflation will start to decline in the final quarter.” According to the medium-term economic plan that Turkey announced in September, inflation is expected to fall to 16.2% by the end of the year, then drop to 9.8% by the end of 2022, and drop by the end of 2022. the end of 2023 and 2024 respectively at 8% and 7.6%. Among those laid off, Ugur Namik Kucuk stands out. Not for nothing was he the only member of the eight-member Monetary Policy Commission to oppose the rate cut last month. “It was the one who voted against the interest rate decision. It is a pity for him and for the country, ”commented a banker operating in Istanbul.