Turkish Lira Collapse: Can It Be Solved?

The Turkish Lira tumbled as much as 15% after President Recep Tayyip Erdogan sacked Naci Agbal, the country's central bank governor this past Saturday. 

Erdogan replaced him with Sahap Kavcıoglu in a surprise move. This is the 3rd central bank governor exit in less than 2 years.

The former central bank governor played a major role behing pulling the lira back from historic lows.

Mr Ncai Agbal, appointed in November 2020, had been raising interest rates to prevent an inflation rate running above 15%.

The dismissal of Mr Abgal has shocked both local and foreign investors who had previously praised Turkey's central bank's recent monetary policy.

Investors have been calling for stricter monetary policy to tame the high inflation rate, as prices keep on rising rapidly in Turkey.

The appointment of Sahap Kavcioglu, a former banker and ruling party lawmaker, sparked massive concerns from investors of a reversal of recent rate hikes.

The fallout from the sacking hit shares on the Istanbul stock exchange.

It also raised red flags about the impact of the country's borrowing costs.

Trading on the exchange was suspended for a short period after a fall in share prices triggered automatic circuit breakers.

Following a sharp drop, the Turkish lira gained some ground to stand about 8% lower against the US dollar after Finance Minister Lutfi Elvan said that Turkey would comply with the free market rules.

The newly appointed central bank governor, Sahap Kavcıoglu, met this Wednesday with the general managers of Turkish banks to discus a range of topics including monetary policy, inflation, global developments and the demands of the banking sector.

What unfolded in Turkey proved that some central bank policies still matter, as does the person who runs the institution.

Turkish_Lira_Collapse.png

Comments

Comments (8)

author
Mark Elliott
Erdogan did it again: He lost the plot.
2021-03-25 15:30


author
Sam Price
Why did Erdogan fire the former central bank governor while doing extremely well given covid and inflation? He will regret this decision unless he has another solid economic plan.
2021-03-25 15:42


author
Ross Smith
Bad move for Turkey
2021-03-25 16:08


author
Chloe Freeman
The Turkish Lira still hasn't recovered
2021-03-25 16:22


author
Richard Gray
Losses keep on pilling, credit agencies will act soon.
2021-03-25 16:35


author
Chris Henderson
Turkey was very dynamic a few years ago and had a great future but political problems are harming the country.
2021-03-25 17:00


author
John Bown
History is repeating itself, all over again.
2021-03-25 17:29


author
Rob Shale
Failing economy, lack of foreign allies and internal division. If Erdogan wanted to reborn the Ottoman empire he unironically did a good job.
2021-03-25 17:44

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