bne IntelliNews -

Turkish President Recep Tayyip Erdogan stepped up his criticism of the central bank on February 25, questioning the loyalty of Governor Erdem Basci, and prompting a slump in the value of the Turkish lira.

The 25 basis point rate cut the central bank delivered this week was not enough and the current rate levels are not suited to the realities of the Turkish economy, said Erdogan, adding that he respects the bank’s independence but he would not hesitate to criticise its mistakes.

Erdogan also questioned the loyalty of the bank and Governor Erdem Basci. “Are you [referring to the bank Basci] in an independence struggle against us, are you under the influence of some other places?” asked Erdogan. Erdogan’s remark about the vague “external influence” was widely interpreted as a reference to his foe, Fethullah Gulen, an Islamic cleric living in the US.

In the past Erdogan has strongly attacked the country’s monetary policymakers but for the first time he publicly suggested a link between Basci and the Gulenist network. Erdogan has accused Gulen and his followers of being the architects and masterminds of last year’s corruption investigations, targeting Erdogan’s inner circle. Erdogan claims that Gulen and his networks wanted to topple his government. During the Gezi park events in 2013, Erdogan also held what he called “interest rate lobby” responsible for the anti-government protests.

After Erdogan’s comments about the bank and Basci on February 25, the lira weakened against the dollar, trading at 2.4911, a two-week high.

Basci has not responded yet to Erdogan’s comments.

On February 24, the central bank trimmed the main one-week repo rate for the second straight month in a row, and also reduced other rates. It lowered the one-week repo by 25bps to 7.50%, cut its overnight lending rate from 11.25% to 10.75% and the overnight borrowing rate from 7.50% to 7.25%.