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In a surprising move, President Recep Tayyip Erdogan of Turkey appointed a new central bank governor on Saturday, just hours after the abrupt resignation of the previous appointee, Hafize Gaye Erkan. Erkan, the fifth Turkey’s central bank chief in five years and the first woman to hold the post, cited a “major reputation assassination campaign” as the reason for her departure.
The unexpected shift occurred approximately eight months into Turkey’s economic program to address a prolonged cost-of-living crisis that has adversely affected many citizens, with annual inflation reaching around 65 percent as of last month.
An extraordinary depth of knowledge and expertise
Fatih Karahan, the bank’s deputy governor, was swiftly promoted to replace Erkan. Despite the sudden change in leadership, senior officials sought to reassure investors, emphasizing that the departure did not signal a shift in policy. Finance Minister Mehmet Simsek described Erkan’s exit as a personal decision and announced that she would be succeeded by “a well-respected macroeconomist with an extraordinary depth of knowledge and expertise.”
Both Simsek and Vice President Cevdet Yilmaz asserted that President Erdogan continued to support the economic team and its existing policies. Since 2018, Erdogan has overseen a policy of consistently lowering interest rates, contrary to conventional economic wisdom, which recommends raising interest rates to curb inflation.
However, after winning re-election in May, Erdogan signaled a change in approach by appointing Erkan and Simsek, steering Turkey back towards orthodox policies. Under their leadership, the central bank repeatedly raised interest rates, reaching 45 percent last month.
The newly appointed central bank chief, Fatih Karahan, brings a wealth of experience to the role. Holding a doctorate in economics from the University of Pennsylvania, Karahan has taught at prestigious institutions such as Columbia University and New York University. His professional background also includes working as an economist for Amazon. Karahan has been a member of the bank committee responsible for setting interest rates since July.
Erkan’s appointment had initially been welcomed due to her background, which included previous positions at Goldman Sachs and First Republic Bank in the United States, suggesting a commitment to conventional monetary policies. However, she faced persistent rumors, especially after a Turkish newspaper alleged that her father, with no official role at the bank, had interfered in its operations—a claim vehemently denied by the bank.
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The sudden change in leadership at Turkey’s central bank
In a statement posted online on Friday, Erkan defended her record, asserting that her approach had started to yield positive results. However, she explained that she chose to step down to protect her family and infant child amid the ongoing rumors and scrutiny.
The sudden change in leadership at the central bank adds a layer of uncertainty to Turkey’s economic landscape, as the nation grapples with inflation and seeks to navigate a path toward stability and growth. Investors will be closely monitoring the new governor’s actions and policy decisions in the coming months.
