Turkey heads for its next crisis after the lira plunges by 15%
Turkey sacked its central bank governor after just four months in the job, sending the lira down by 15% against the dollar and stocks down by 9%.

Which building boasts the world’s “fastest revolving doors”? asks The Economist. Turkey’s central bank is surely a contender. Three governors have been fired in less than two years by capricious president Recep Tayyip Erdogan. Naci Agbal, the latest boss, was removed at the weekend after just four months in the job. That sent the Turkish lira plunging by 15% against the dollar. Turkish stocks tumbled by 9%.
Agbal’s sin was to have raised interest rates, a big no-no with Erdogan, who subscribes to the eccentric view that higher interest rates bring higher inflation (all economists and analysts believe the opposite). Turkish inflation hit 15.6% last month, prompting Agbal to raise interest rates two percentage points to 19%.
Turkey is not the only emerging market under pressure. Higher US Treasury bond yields have strengthened the dollar. That has prompted central banks from Brazil to Russia to hike interest rates in order to defend the value of their currencies. New Turkish central bank governor Sahap Kavcioglu, an Erdogan ally, looks poised to reverse Agbal’s interest-rate hikes next month. That reduces the lira’s appeal to investors, prompting them to sell it.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This affair is a reminder of the importance of independent central banks, says John Authers on Bloomberg. There are many leaders with odd economic views, but most leave monetary policy to the experts. Autocractic Erdogan cannot resist the urge to meddle.
A familiar script
The next steps are predictable, says Phoenix Kalen of Societe Generale. Kavcioglu will first try to use the central bank’s dwindling currency reserves to defend the lira, “lose the currency battle with markets, and ultimately have to engage in emergency” interest-rate hikes, precisely what he wanted to avoid in the first place. Capital controls could also be in the pipeline. Expect “a vintage emerging markets crisis”.
Trouble in one emerging market can quickly spread to others, notes Russ Mould of AJ Bell. When Malaysia imposed capital controls in 1998, global investors fled from other emerging markets for fear of similar measures. The turmoil rippled worldwide, sending the FTSE into a bear market.
Other big emerging markets look better insulated this time, says William Jackson of Capital Economics. All appear to have the currency reserves they need to ward off a crisis, leaving Turkey as a struggling outlier. Foreign investors have also learnt their lesson from the 2018 lira crisis: non-resident holdings of Turkish assets have fallen by half in dollar terms since then. That reduces the odds that trouble in Turkey will spread beyond its borders. The latest bout of erratic policymaking is bad news for Turkey. A weaker lira will bring higher inflation; the banking sector looks to be in trouble. But it should have a “limited” impact further afield.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
The five insurance policies you should have
Some insurance cover will be more important than others. We look at five insurance policies you may need to have to make sure you aren’t caught out in an emergency
-
Is Donald Trump putting the US dollar in danger?
Donald Trump's administration sees one of its greatest advantages – the US dollar – as a burden. Gold is the obvious beneficiary, says Cris Sholto Heaton.
-
The British railway industry is in rude health – here's why investors should jump aboard
The railway industry has bounced back from the devastating impact of the pandemic and is entering a new phase of development – and profitability
-
Infrastructure investing: a haven of stable growth amid market turmoil
From booming construction in emerging markets to digital and green transitions, the infrastructure sector offers security, returns and long-term opportunities
-
The costly myth of “sell in May”
Opinion May 2025's strong returns for US stocks have once again shown that putting too much weight on seasonal patterns will only make investors poorer, says Max King
-
Who’s driving Tesla?
As Elon Musk steps back from government with his eyes on the stars, investors ask if he’s still behind the wheel at his electric-car maker.
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
A fund that looks past the short term in Asia
Growth should remain strong, but successful managers also need to focus on governance. Here's how to find active opportunities in Asian markets.