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LONDON, Nov 9 (Reuters) - The ramifications of Turkey’s replacement of its central bank governor and the departure of its finance minister on monetary policy remained uncertain, S&P Global Ratings said on Monday.
Authorities had previously been reluctant to tighten the cost of credit, though had opted to deliver a 200 basis point repo rate hike at the end of September as well as more backdoor tightening measures, Maxim Rybnikov, associate director at S&P Global Ratings, said in an emailed statement to Reuters.
“It remains to be seen whether the recently announced leadership changes could underpin more decisive steps in the same direction,” he added.
President Tayyip Erdogan’s son-in-law Berat Albayrak said on Instagram late on Sunday he was stepping down as finance minister after two years for health reasons.
That came after an official notice in the early hours of Saturday that Erdogan had replaced the central bank chief Murat Uysal with a former finance minister.
“The changes in central bank leadership again illustrate the country’s lack of independent monetary policy that has particularly characterised the period after President Erdogan gained powers over monetary governance in the constitutional reform of 2018,” said Dennis Shen, director of sovereign and public sector at Scope Ratings, another ratings agency.
“This deficit of monetary policy independence is discernibly credit negative.”
In its biggest rally in more than two years, the lira soared as much as 6% against the dollar on Monday. It follows a plunge to a record low this year due to worries over dwindling foreign reserves, state interventions in currency markets, and negative real rates.
Commenting on the weaker lira, S&P’s Rybnikov said it posed a risk for the domestic corporate sector given the substantial amount of foreign currency denominated debt and the currency impact on debt servicing.
“A tighter monetary policy could serve as a circuit breaker,” he added.
Turkey’s sovereign remained rated B+ with a stable outlook, he said.
Editing by William Maclean
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