The Turkish Lira has taken a bath these past two weeks, triggered by the comments of President Recep Tayyip Erdoğan, who in his reported comments at Chatham House and in a Bloomberg interview implied the independence of the Turkish Central Bank was in question. Erdoğan said that he is planning to assume greater control in setting monetary policy if he wins the forthcoming elections on June 24 that will seal Turkey’s move to a full Presidential system.
It caused a freefall in the value of the Lira which has dropped more than 20 per cent against the US Dollar over the past month, amid the backdrop of an overheating Turkish economy and in the context of Emerging Market outflows which have suffered since the Fed rolled back its expansionist stimulus.
Central bank communications have historically been brief and gnomic. Alan Greenspan’s inscrutable Wizard of Oz language spawned an industry of interpreters who would pore over whether he used the present or past tense as an indicator of forward guidance. Boring was seen as good, because governors know that their slightest break from the normal, the subtlest hint can cause markets to react. Post financial crisis, Ben Bernanke knew it was crucial to build public understanding of the Fed’s actions and better transparency was a key tenet of monetary policy which led to its very first press conference in 2011. Bank of England Governor Mark Carney has been at the forefront of bringing more clarity of both thought and communications for the institution. As he puts it “Say it straight. Say it simply. Say it over.”
Turkey’s central bank has legal autonomy. But the communications of Erdoğan carry as much weight with the markets as central bank action. The President has been the proponent of some fairly unorthodox economic thinking and has insisted over many years that there has been a malign, foreign (particularly US) interest rate lobby at work interfering with domestic economic affairs and that only an interest rate cut would have the positive effect of propping up the Turkish Lira.
The rout was only temporarily stopped by a reluctant 300 basis point hike on Wednesday evening, but soon the sellers returned, with the Lira sliding another 4 per cent on Thursday. It echoes evidence of the creeping politicisation of central banks everywhere, and that communications around monetary policy and central bank actions are delicate and fumbled at one’s peril. The message Erdoğan delivered – that of continuity of leadership implying a better grasp on the economy – was badly received by a financial markets audience, to devastating impact.
Lord of the Rebranding
The Norwegian semi-state oil company has done a fair job tackling the notoriously tricky corporate exercise of rebranding. No longer Statoil (too oil-y, too Russian sounding, not environmental enough) the company is now Equinor. The name combines the root of words like equality and equilibrium with “nor” – a nod to their Norwegian roots. Although some have likened it to something from a Tolkien novel, it better explained their broader business based on multiple forms of energy production.
The corporate world has a long list of terrible rebrands, most famously PWC who attempted and failed to change its name to ‘Monday’ in 2002. Equinor apparently limited the cost to a mere $30 million to do this, compared to BP’s $110 million or the eye-watering $1.2 billion that Symantec paid to redesign its identity and architecture. Equinor has managed to explain well why the name change made sense, as this video rather beautifully illustrates. Its YouTube channel is worth a look at how to do it well. The social strategy clearly worked and the rebrand became the number one trending topic in Norway on the announcement day.