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Turkey's Erdogan replaces central bank governor as lira plummets

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
In this file picture, a money changer counts Turkish lira bills at an currency exchange office in Istanbul, Turkey. (Photo by Reuters)

Turkish President Recep Tayyip Erdogan has removed the central bank governor from his post and replaced him with former finance minister Naci Agbal after the national currency lira depreciated to a record against the US dollar.

The decision to dismiss Murat Uysal was made by presidential decree, and announced in the country's Official Gazette early on Saturday.

Agbal had been finance minister from 2015 until 2018, when he was appointed to head the directorate of presidential strategy and budget. His deputy Ibrahim Senel has now taken up the post.

The development came as the lira closed at 8.5445 against the US dollar on Friday after it fell to a record low of 8.58 per dollar, despite the fact that the greenback has retreated amid worries about a second coronavirus wave and uncertainty as to the final results of the US election.

Erdogan appointed then-deputy governor Uysal to head Turkey’s central bank back in July 2019, when he sacked his predecessor Murat Cetinkaya for his refusal to cut interest rates.

The Turkish president has repeatedly said he believes that high interest rates cause inflation, flying in the face of the economic rule that tightening the monetary supply reduces inflation. 

Last weekend, he said Turkey was fighting an economic war against those squeezing it in “the devil's triangle of interest and exchange rates and inflation.”

Bearishness towards the lira stems from Turkey’s plans to test Russian-made S-400 missile systems in defiance of US complaints, while at the same time its depleted reserves, high inflation and political interference in monetary policy.

Ankara is also pushing its own agenda in the eastern Mediterranean, and is seriously at odds with European Union members Greece and Cyprus in the region.

Turkey's Milliyet daily newspaper reported on Thursday that Finance Minister Berat Albayrak had ruled out intervening to support the lira, reiterating government concerns that higher interest rates could impede measures aimed at boosting the economy.

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