Turkish lira crashes after central bank chief is laid off

In Turkey, the financial markets reacted in shock to the dismissal of the central bank chief on Monday. The lira plunged 17 percent against the dollar, the prices on the stock exchange in Istanbul collapsed so sharply that trading had to be suspended for half an hour. President Recep Tayyip Erdogan dismissed central bank chief Naci Agbal, a former finance minister respected in the financial world, by decree on Friday evening.

The rate of the Turkish currency fell sharply in the morning on Monday. A dollar cost 8.47 lira for a short time – at the end of last week the rate was 7.22 lira. After the first crash, the price climbed back to 8.09 lira on Monday. Finance Minister Lütfi Elvan assured that Turkey did not want to suspend foreign exchange trading. “We will stick to our economic policy until we have achieved a permanent reduction in inflation,” he said.

On the Istanbul stock exchange, the leading index fell by 6.65 percent. Therefore, in accordance with the regulations, trading was suspended during such large price movements. It was resumed after 35 minutes.

On Friday, President Erdogan gave no reason for the dismissal of central bank chief Agbal after only five months in office. However, the move only followed two days after the key interest rate hike. Erdogan considers high interest rates to be the “father and mother of all evils”, in his opinion – and contrary to the prevailing opinion in economics – they favor inflation.

Agbal was replaced by the scientist Sahap Kavcioglu, a member of Erdogan’s party. He had given assurances on Sunday that he would take the “necessary measures” in the fight against inflation.

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