TURKEY’S central bank splashed £1.4 billion defending the ailing lira today in the wake of President Erdogan’s shock decision to sack its governor.
The authoritarian’s move against Murat Cetinkaya — announced by presidential decree this weekend — sent shockwaves through the currency, which plunged as much as 3% in trading today.
The central bank launched a 10 billion lira (£1.4 billion) repo operation in response, moving into money markets and spending its cash in a bid to support the currency.
Erdogan has drafted in deputy governor Murat Uysal as a replacement following months of tension with the central bank, which is being pressured by the strong-man leader to cut interest rates.
The central bank has kept rates high since last September to ward off a currency crisis but Erdogan — in a radical departure from economic orthodoxy — insists that higher rates lead to inflation. The central bank makes its next decision on rates on July 25, when Uysal will be under pressure to cut from the current 24%.
