Erdogan elects a defender of low rates as economy minister and the lira falls again

FILE PHOTO: Turkish President Tayyip Erdogan speaks during a press conference following his meeting with German Chancellor Angela Merkel at the Huber Mansion in Istanbul, Turkey, on October 16, 2021. REUTERS / Murad Sezer / File Photo

Por Ezgi Erkoyun

ISTANBUL, Dec 2 (Reuters) – Turkish President Tayyip Erdogan on Thursday appointed a staunch supporter of his low interest rate campaign as finance minister, replacing Lutfi Elvan, considered a supporter of orthodox politics, in a government gripped by monetary collapse.

Nureddin Nebati was named after his predecessor, Elvan, asked to be “released from his duties,” according to the Official Gazette, as the lira hit a series of all-time lows, hit by market concerns over the direction of economic policy.

Nebati, who was deputy finance minister for three years, praised Erdogan’s initiative to lower interest rates last week, saying Turkey had tried for years to pursue a low rate policy but had faced strong opposition.

“This time, we are determined to implement it,” he wrote on Twitter, adding that there was “no problem” in keeping interest rates low under current market conditions.

The Central Bank has cut rates three times since September, reducing its official interest rate by 400 basis points to 15% last month, with inflation close to 20%.

The lira slumped 27% in the last month. On Thursday, following Nebati’s appointment, the lira weakened slightly to 13.5 per dollar.

Elvan’s departure had been widely anticipated and scrutinized by the media and opposition politicians, and marks a new stage in a review of economic and monetary policies.

Erdogan has fired three central bank governors since mid-2019, and removed three of the bank’s top monetary policy makers in October.

Like former Central Bank Governor Naci Agbal, who was fired in March, Elvan “was seen as a supporter of more restrictive demand management policies and more focused on reducing inflation,” said Murat Unur at Goldman Sachs.

“As a result, his resignation is likely to be viewed negatively by the market, which sees the need to tighten monetary policy.”

In a first reaction to his appointment, Nebati wrote on Twitter: “My God, make it easy, don’t make it difficult … make the outcome beneficial.”

(Reporting by Ezgi Erkoyun, Daren Butler and Ece Toksabay; writing by Dominic Evans; editing by John Stonestreet, translated by Tomás Cobos)

Leave a Reply

Your email address will not be published.