Agbal’s shock sacking throws Turkish credibility into disarray

Published: July 15, 2021

Turkey’s currency was plunged into chaos at the end of March when the government abruptly fired the head of the central bank, and analysts reckon the surprise move will have long lasting ramifications for the country’s credibility in the financial markets.

On 20 March, Turkey’s president Tayyip Erdogan shocked markets by sacking central bank (CBRT) Governor Naci Agbal after five months in the post. This is the third central bank governor that Erdogan has dismissed in two years.

This time, however, felt different, according to multiple analysts, mostly because the sacking came days after Agbal raised rated by 200bp, which was about double the consensus forecast, to 19%. 

In the prior four months, Agbal had overseen 875bp in rate rises, with the CBRT saying that domestic demand, exchange rate effects, rising commodity prices and high inflation expectations had prompted the decision to raise above market expectation.

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