FT News Briefing Turkey investors shaken by central bank governor firing
Mar 23, 2021
Turkey's investor confidence takes a hit after the abrupt firing of the central bank governor, sending the lira into a tailspin. Vaccine production increases lead to surprising shortages of essential medicines for chronic patients. Meanwhile, the financial industry faces scrutiny over the demanding work environment for junior bankers, prompting Goldman Sachs to commit to better conditions. This all unfolds against the backdrop of rising U.S. bond yields that threaten emerging markets.
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Turkey's Lira Tumbles
- Turkish President Erdogan replaced the central bank governor after a short-lived interest rate hike.
- This caused the lira to plummet and raised concerns about Turkey's monetary policy.
Unorthodox Economics
- The new governor, Sahap Kavcioglu, is seen as an Erdogan loyalist with unorthodox views on inflation.
- He believes higher interest rates increase inflation, contrary to conventional economic theory.
Emerging Markets
- Turkey's situation contrasts with other emerging markets like Brazil and Russia, which also raised interest rates.
- Rising US bond yields make it harder for emerging markets to attract foreign capital, necessitating higher rates.