Turkish Lira drowns 2% after Erdogan ousted Central Bank Governor

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Turkish Lira drowns 2% after Erdogan ousted Central Bank Governor

On Monday, the 8th of July 2019, Turkish Lira was plummeted by more than 2 percent against American dollar, after Turk President Tayyip Erdogan had ousted Turkey's Central Bank Governor, blaming their conflict of opinions about the timing of interest rate cut amid a recession-struck economy.

While this report was being prepared, during midday European trading hours, Turkish Lira was drowned by 1.6 percent, after tumbling as much as 2 percent to 5.8245 during the early Asian trading hours, as investors remained fretted over the independence of Turkish Central Bank.

Latest decision of Turkish President came forth amid a time, when a majority of global economic leaders had been pressing their central banks to ease policy to offset impacts of a slowing global economy. Besides, latest Erdogan’s decision to supplant his Central Bank Governor came after a few days, US President Donald Trump had threatened to oust Federal Reserve Chair Jerome Powell over differences about their opinions regarding rate cut, and jeopardizing the independence of United States’ central bank.

Adding concerns over Turkish economy amid a tempestuous political backdrop following Erdogan’s AK Party’s defeat in Istanbul Mayoral election, an EM strategy director at French lender, Societe Generale, Phoenix Kalen, wrote in a client note, “His removal speaks to Erdogan’s insistence on imposing his diktats on monetary policy, and more broadly, it suggests tight presidential control of economic policies.

Monetary policy-setting might be even more influenced by political pressure, leading to aggressive interest rate cuts that could undermine financial market stability and demand for local assets”