Turkish currency drops after central bank chief is fired

Turkey Will Soon Have Russia's S-400 (And Is Stockpiling F-16 Parts)

Central bankers have to look further and ensure the economy does not overheat.

President Recep Tayyip Erdogan intensely disliked the interest rate policy of his central bank chief Murat Cetinkaya.

A row over interest rate cuts is understood to have triggered the removal of Murat Cetinkaya on Saturday. Hurriyet newspaper said the governor had rejected calls by the president to lower the benchmark interest rate, which now is at 24%.

Erodgan wants the interest rates lowered in the belief that it fuels economic growth, but instead, it will likely increase Turkey's debt burden while lowering the value of the lira.

Markets, however, are anxious that the central bank will now cut rates as desired by Erdogan. Yet while Congress is drawing up potential sanctions plans that at their harshest would cripple the Turkish economy, U.S. President Donald Trump has cast Turkey as a victim in the saga.

Asian shares slipped on Monday as investors wagered on a less aggressive policy easing in the United States, while the Turkish lira held near two-week lows after the country's president dismissed its central bank governor over the weekend.

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The orthodox policy did tame inflation.

Now the foreign exchange market will look excited at 25th of July. "Our country does have the luxury to monitor developments in this geography", Erdogan told reporters at Istanbul Airport.

All in all, the markets will look very skeptically on the sacking of Cetinkaya, especially as there are potentially more troubled times ahead.

Relations between the two countries deteriorated over the course of the Syrian civil war, when the US armed a Kurdish militia that Turkey views as a terrorist group, and in the aftermath of a 2016 coup attempt against Erdogan that his government blames on a Turkish imam residing in the U.S.

The challenge to the independence of the Turkish Central Bank takes place in a sensitive political context, just as Turkey prepares to take delivery of a Russian S-400 air defence system.

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