President Recep Tayyip Erdogan has appointed Fatih Karahan, the Deputy Governor of the central bank, as its new head, succeeding Hafize Gaye Erkan, who resigned from her position. The announcement of Karahan’s appointment, a former senior economist at the US online retail giant Amazon, was made in the Official Gazette early on Saturday. Erkan cited the necessity to safeguard her family amidst a media scandal as one of the reasons for her resignation.
Cabinet leaders swiftly affirmed that the economic program, which had been effective in tempering inflation expectations amid a prolonged cost-of-living challenge, would continue under Karahan’s leadership. Karahan, recognized for his pivotal role in orchestrating the monetary tightening, is expected to uphold the initiatives.
As the first woman to helm the bank, Erkan initiated interest rate hikes upon her appointment in June the previous year, marking a significant shift from years of low rates under Erdogan’s administration. These low rates had previously contributed to escalating inflation and a retreat of foreign investors.
Under Erkan’s leadership, the central bank raised its key rate dramatically from 8.5 percent to 45 percent. Following another 250-basis-point increase last week, the bank indicated that it had implemented adequate measures to achieve disinflation, signaling a pause in rate hikes.
In her resignation statement, Erkan highlighted the positive outcomes of the economic program, including bolstered foreign reserves and expectations for a gradual decline in inflation starting around the middle of the year. She also referenced a recent orchestrated defamation campaign against her, stating her decision to step down was to shield her family, particularly her young child, from further repercussions.
In the previous month, the opposition newspaper Sozcu ran a story concerning a central bank employee who alleged wrongful dismissal from the bank by Erkan’s father.
In response, Erkan denounced the article as “unfounded” and deemed the targeting of her family and the bank as “unacceptable.” She vowed to pursue legal action against those responsible for the report.
Subsequently, Erdogan criticized attempts to spread “rumors” aimed at undermining economic progress, implicitly expressing support for Erkan, who became the bank’s fifth governor in as many years.
Finance Minister Mehmet Simsek characterized Erkan’s resignation as a personal choice, affirming that the economic program would proceed without interruption.
Karahan holds a doctorate in economics from the University of Pennsylvania and previously served as an economist at the Federal Reserve Bank of New York. Simsek reiterated Erdogan’s support for the economic team and program, a sentiment echoed by Turkish Vice President Cevdet Yilmaz in a separate statement.
With inflation reaching nearly 65 percent last month, forecasts suggest a gradual decline starting around June, offering some relief to Turks who have grappled with unaffordable rents and other basic needs in recent years.
Foreign investors, including prominent entities like Pimco and Vanguard, began investing in Turkish assets late last year, signaling confidence in Erkan and Simsek’s economic program.