Erdogan plunges Turkey into further turmoil after history of erratic economic policy

Turkey’s economy faces further turmoil after President Recep Tayyip Erdogan’s surprise ouster of central bank governor has added another chapter to years of unpredictable economic policy, scaring foreign investors and possibly sowing the seeds of ‘a financial crisis.

Last Friday, Erdogan replaced Naci Agbal with Sahap Kavcioglu, a former member of parliament from Erdogan’s Justice and Development Party, who publicly backed the president’s calls for lower interest rates, despite a inflation reaching 15.6% per year in February.

Mr Erdogan, who sacked three central bank chiefs in less than two years, prefers low rates as part of a strategy to encourage growth.

He opposed the policies put in place by Agbal, who raised interest rates in a bid to fight inflation and help Turkey come out of the brink of the crisis. Mr Agbal’s policies have encouraged investors to re-inject billions of dollars back into the country since his appointment in November.

Mr Agbal’s sacking triggered one of the worst sales of Turkish lira-denominated assets in a single day on Monday as investors reduced their exposure to the currency. The lira fell 7.5% against the dollar in one day. Mr Kavcioglu sought to reassure markets that he would reduce inflation but did not say if interest rates would change.