Turkey's new cenbank head to meet bankers Sunday amid questions: sources

ISTANBUL (Reuters) – Turkey’s new central bank chief will hold a call with bank CEOs on Sunday afternoon, a day after he was appointed in a shock leadership overhaul that left investors predicting quick rate cuts and a lira selloff, two sources told Reuters.

FILE PHOTO: A logo of Turkey’s Central Bank (TCMB) is pictured at the entrance of the bank’s headquarters in Ankara, Turkey April 19, 2015. REUTERS/Umit Bektas/File Photo

In his first comments as governor, Sahap Kavcioglu said on Sunday he would continue to set policy to achieve a permanent fall in inflation, which is in double digits.

President Tayyip Erdogan abruptly sacked former central bank chief Naci Agbal in the early hours on Saturday, two days after a sharp interest rate hike, and named Kavcioglu, who like the president is an outspoken critic of tight monetary policy.

It was the third time since mid-2019 that Erdogan ousted the head of the central bank, denting credibility that Agbal had begun to restore with a more orthodox approach since he was appointed in early November, analysts said.

The online call with the heads of Turkey’s big private and public lenders will aim to address the current market and policy situation, said the two sources with direct knowledge of it.

The central bank did not immediately comment. Separately, central bank employees said Kavcioglu, a former lawmaker in Erdogan’s ruling AK Party, had visited its headquarters in Ankara earlier on Sunday.

The call could help bankers and their clients understand how policy might shift given Kavcioglu’s public calls for looser policy. Agbal had hiked the key rate to 19% from 10.25% since November, including a 200 basis-point rise on Thursday.

Turkish bankers and foreign investors told Reuters they had worked through the weekend to predict how quickly and sharply Kavcioglu might slash rates – and how much the lira would retreat from its Friday close of 7.2185 versus the dollar.

The heads of some local treasury desks estimated that offers could range from 7.75 to nearly 8.00 on Monday, bankers said. At Istanbul’s Grand Bazaar on Saturday, a dollar bought 7.80-7.90 of the local currency, one trader said.

Turkish stocks and bonds were also expected to drop in early-week volatility.

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