Turkish president's jab at Central Bank stirs markets, politics

President Recep Tayyip Erdo?an?s continued harsh criticisms of the Central Bank have raised concerns about the future of its governor, Erdem Ba?ç?, as well as Deputy Prime Minister Ali Babacan, both of whom are widely respected among global market players. Speculations about the possible resignation of both Ba?ç? and Babacan have stirred markets for the last two days, despite the denials from several authorities.

A lengthy meeting between Prime Minister Ahmet Davuto?lu and Deputy Prime Minister Ali Babacan late on Feb. 25 raised speculations that Babacan had resigned from his post after Erdo?an continued his criticism of the Central Bank. Many market and political actors found the long, unscheduled talk between the two worrying, coming after Erdo?an directed some of his toughest criticisms ever at Ba?ç?.
 
On the afternoon of Feb. 25, the president questioned whether the Central Bank was under ?external influence,? repeating that its interest rate policy was ?not suitable? for Turkey?s economy.

His comments, a day after the Central Bank cut its key one-week repo rate by 25 basis points, triggered a fall in the Turkish Lira to 2.4800 against the dollar, from 2.4670 beforehand.

?Don?t take a stance against us using the cover of independence,? Erdo?an warned the bank in a speech in Ankara. ?If you do so, we may ask whether some place is exerting an influence on you.?

Babacan and Davuto?lu held a lengthy meeting after these comments from Erdo?an. However, state-run Anadolu Agency reported that the two discussed the latter?s upcoming visit to New York, where he is expected to meet financial and investment circles as part of the second leg of an investors? conference held in London in January, as well as some other issues,...