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Murat Uysal (left) handed the assignment to Naci Ağbal in a ceremony on Saturday.
The president of the Central Bank of the Republic of Turkey (CBRT), Murat Uysal, was removed by decree issued on Friday night. Naci Ağbal, a former finance minister, was replaced by Uysal.
The Presidential Decree announcing that Murat Uysal was removed from office and Naci Ağbal became the new head of the CBRT was published in the Official Gazette on Friday evening.
Ağbal, who served as Finance Minister for two terms, has served as Chairman of the Presidency of Strategy and Budget since July 2018.
The decision of Professor Universe Bolger, professor at the University of Işık, “the independence of the techniques of the Central Bank of Turkey and disappeared as a verb. Because a former Minister of Finance, in front of a party, representing the whole country that CBT , called true, by brought “evaluated.
Bolgün believes that this change in tariff will negatively affect the exchange rate and the economy.
Member of the Faculty of Business Administration at the University of Marmara Prof. Dr. Burak Arzova believes that the markets are focused on raising interest rates rather than changing the president.
Arzova said: “This week is critical. At first, I do not think there will be a negative reaction and an abnormal increase in the exchange rate, because Naci Ağbal will be given a margin on the rise in the interest rate. If he does not raise the interest rate. interest rate, it can be dangerous to see that nothing changes and the stubbornness continues in the market. ” Comment.
Why was the governor of the Central Bank removed from office?
Responding to questions from the Turkish BBC, economist Evren Bolgün believes that the indirect interest rate hike by the CBRT played a role in Uysal’s firing.
The CBRT increased the interest rate applied to the market to 14.75 percent with the liquidity steps recently implemented.
Bolgun, “Indirect increase in interest rates affects loan rates directly and deposit rates indirectly.”
Member of the Faculty of Business Administration of the University of Marmara Prof. Dr. Burak Arzova emphasizes that it is not known why Uysal was fired because there was no explanation:
“I wonder if he was fired because he did not initiate the process of raising interest rates. But on the other hand, he increased it indirectly. Or was it the pressure of the market and they could not resist that pressure? We do not know if the president wanted to appoint someone more distant from the Ministry of Finance. “
“We know that Naci Ağbal is very close to the President, therefore, through that proximity, we can find a Central Bank that has been controlled by the Presidency from the Ministry of Finance in this period. Since we know Ağbal’s predisposition to implement orthodox policies earlier, an increase in interest may come in this period. “
‘Expected rise in interest rates in the market’
Robin Brooks, chief economist at the International Finance Institute (IIF), said on Twitter: “Some market players see the change in the CBRT chairman as a regime change for TL to find equilibrium and raise interest rates. Right or wrong We don’t know. “We can say that the market’s expectation of a rapid rate hike has increased.”
The meeting of the Monetary Policy Committee (MPC), where the CBRT will make its next decision on the interest rate, will be held on November 19.
Responding to questions from BBC Turkish, economist Prof. Dr. Burak Arzova says that Naci Ağbal cannot wait until November 19 for the rate hike:
“With his dismissal, there has been an intense expectation of an interest rate increase in the market these days. Ağbal may want to use this first credibility.”
‘New high levels will be seen in the exchange rate’
Saying that Naci Ağbal will be tested by domestic and foreign markets for the next two weeks, economist Bolgün says: “I do not predict that this test will be successful if it does not increase interest rates. They need to do a greater amount of interest increase than before”.
Therefore, Bolgün believes that new highs will be seen in the exchange rate.
The USD / TL rate hit a record 8.5793 on Friday.
CBRT raises interest rates with liquidity steps
The CBRT’s Monetary Policy Committee kept the policy rate, which is the one-week repo rate, at 10.25 percent, and raised the late-liquidity window rate from 13.25 percent to 14.75 percent. at their October meeting.
Therefore, Uysal gives the policy interest as 10.25 percent to Ağbal.
However, the rise in exchange rates against the Turkish lira of the dollar and the euro in recent weeks has led the CBRT to raise the interest rate in other ways.
CBRT tightened up with the liquidity steps it has recently introduced; Thus, the interest rate applied to the market increased to 14.75 percent.
Erdogan: CBRT chief was not listening
Murat Uysal became the head of the CBRT after the removal of Murat Çetinkaya, who was then the head of the CBRT, on July 6, 2019.
About 10 months passed before Çetinkaya’s term expired.
President Recep Tayyip Erdogan made a statement on the removal of Çetinkaya: “We took the authority to remove the head of the CBRT, he was not listening. We continued with a new friend, we said we would lower interest rates.”
Murat Uysal became the world’s largest rate reduction chairman in 2019
Following Erdogan’s words on the need to cut interest rates, Uysal, who became the head of the CBRT, became the head of the Central Bank in the world in 2019, with the reduction decisions reaching a total of 1200 basis points (12 full points).
Uysal cut the interest rate by 425 basis points at the PPK meeting in July 2019, which he first attended as chairman after taking office.
Therefore, the policy interest rate was reduced from 24% to 19.75%.
The rate cut continued in subsequent meetings; Thus, Uysal made an interest rate cut of 1,200 basis points in 2019.
Criticized for selling reserves
CBRT continued to cut interest rates in 2020.
In the first 5 months of 2020, the policy rate dropped by another 375 basis points and the policy rate dropped to 8.25 percent in May.
With the outbreak of the coronavirus crisis, the policy rate increased by two full points to 10.25 percent in September.
One of the biggest criticisms Uysal received was the sale of reserves to limit the increase in the exchange rate.
Goldman Sachs estimates that Turkey will spend $ 101 billion to intervene in the currency this year.
‘That’s why courtship may have increased on Friday’
Speaking to the Dünya newspaper, analysts said they were surprised that Murat Uysal was fired and the decision was unexpected.
According to the same article in the newspaper, some analysts attribute the rise of the currency on Friday that the market may have learned to discard.
Speaking to the newspaper, analysts pointed out that with the appointment of Naci Ağbal, it was the first time that an external president had come to the Central Bank.
Babacan: a reflection of mismanagement
Professor Özgür Demirtaş, finance president of Sabancı University, commenting on Twitter about the change of position under the presidency of the Central Bank, said: “Whatever the central bank governor is, what must be done: 1 ) Direct and hard rate hike. 3) Independence of the president. If this happens, we will heal the wounds in the short term. Structural reform is essential for long-term recovery, “he said.
The president of the Democracy and Advancement Party (DEVA Party), Ali Babacan, on the other hand, evaluated the change of office led by the CBRT in the regular Mardin Provincial Congress of his party.
Babacan, who was the head of the economic administration when the AKP came to power, said: “You cannot escape responsibility by destroying all this problem to a single bureaucrat,” and said: “The sudden removal of the Central Bank governor and the appointment of another president is nothing more than a reflection of bad government. ” .
