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Turkish lira hits record low after Erdogan fires central bank officials

The Turkish lira hit a record low overnight after President Recep Tayyip Erdogan ordered a new round of layoffs at the country’s central bank.

In a nightly decree published hours after meeting Sahap Kavcioglu, the bank’s governor, Erdogan removed two deputy governors.

One of them, Ugur Namik Kucuk, was the only member of the bank’s eight-member monetary policy committee to oppose a rate cut that surprised international investors last month, according to two people familiar with the matter.

“He was the one who voted against the decision to cut interest rates, so it’s a shame for him and for the country,” said an Istanbul banker.

Kucuk also opposed the controversial policy of selling the bank’s foreign currency reserves in a doomed attempt to shore up the lira, the banker added. The policy started in early 2019 and continued until the end of last year.

The second deputy governor fired, Semih Tumen, had been the subject of reports that he could be appointed to replace Kavcioglu.

The president also removed Abdullah Yavas, a former member of the monetary policy committee who had faced criticism in the Turkish media for living in the United States.

The lira, which was already under pressure due to the strength of the US dollar and investor concerns about Turkish economic and foreign policy, fell 1 percent in overnight trading to TL9.19 per dollar. The coin has endured a painful few years, losing 59 percent of its value against the dollar since the beginning of 2018.

Erdogan, who has ruled Turkey for nearly two decades, has gained unprecedented control over the nominally independent central bank in recent years after taking steps to consolidate his own powers.

The president, an opponent of high interest rates, has faced a succession of governors as he has tried to prioritize high growth at all costs, including skyrocketing inflation. He has fired the head of the central bank three times since mid-2019, in addition to firing several other officials.

The lira came under pressure last week after Reuters. reported that Erdogan had lost faith in Kavcioglu, who was appointed in March, even though he slashed the bank’s benchmark rate last month to 18 percent at a time when annual inflation was 19 percent.

The president’s communications chief rejected that claim, and Wednesday’s meeting between Erdogan and Kavcioglu, which was announced by the president’s office, is likely to be interpreted as a show of support for the governor.

Kucuk was a well-known figure in the international financial community. A former chief economist at the private bank Garanti, he often led the answer to questions from foreign investors during monthly calls. Market participants were impressed by his absence from a meeting that took place last week.

Taha Cakmak, a former official of the Turkish state-owned Ziraat Bank and banking regulator, has been appointed as the new deputy governor. Yusuf Tuna, an academic at Istanbul Commerce University, was appointed to the monetary policy committee.

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