How the decision of the President of Turkey Erdogan to change the head of the Central Bank has affected the currency and what are the prospects for the country.
Murat Cetinkaya, Head of the Central Bank of Turkey, was dismissed last weekend. He is replaced with Murat Uysal, Deputy Head of the Central Bank. Recep Tayyip Erdogan, President of Turkey, issued this decree.
Against this decision, the Turkish lira fell by over 2%. The currency weakened for the first time since March 2019.
Head of Currency Strategy of Brown Brothers Harriman & Co. Win Ting believes that the main “crime” of the ex-head of the Central Bank is the refusal to reduce interest rates. Erdogan also expresses confidence that high interest rates cause inflation in the country. He believes that all Turkish officials and politicians should adhere to this position.
Inflation in the country grew by 40% since H2 2018. The interest rate was increased to 24%, despite the fact that this decision was criticized by the President. Analysts believe that the country's economy will face a recession in the near future.
Rabobank experts believe that since the decision of the President to replace the Head of the Central Bank provoked a sharp fall of the Turkish lira value in the first hours of trading on Monday, the decrease of interest rates by several points at the end of July will be a serious political mistake of the Central Bank.
Today, on July 8, USD/TRY currency pair is traded at 5.7613.