Turkey’s Central Bank Gets New Governor as Erdogan Shifts Towards Conventional Economic Policies
President Recep Tayyip Erdogan, recently re-elected, has chosen Hafize Gaye Erkan, a former US-based bank executive, as the new governor of Turkey’s central bank. This appointment signals a potential shift towards more conventional economic strategies within Erdogan’s administration.
Erkan, who previously served as co-chief executive officer of the First Republic Bank, becomes the first female governor of the central bank. Her appointment comes as Turkey grapples with a cost-of-living crisis aggravated by soaring inflation, which reached a staggering 85 percent in October. However, in May, the inflation rate dropped below 40 percent for the first time in 16 months, primarily due to a favorable base effect.
Critics attribute the economic turmoil to Erdogan’s policy of lowering interest rates to stimulate growth, a strategy that contradicts conventional economic wisdom advocating for rate hikes to combat inflation. Erdogan defends his approach, asserting that it will ultimately strengthen Turkey’s economy in the long run.
Erkan, who holds a Princeton education and has previously worked as a managing director at Goldman Sachs, will replace Sahap Kavcioglu, the former governor responsible for implementing a series of rate cuts since 2021. Kavcioglu has been reassigned to lead the Banking Regulation and Supervision Agency (BDDK), the country’s banking watchdog.
In another notable appointment, Erdogan has also reappointed Mehmet Simsek, a highly regarded former banker, finance minister, and deputy prime minister educated in the United Kingdom, to head the finance and treasury ministry. Simsek’s return after a five-year hiatus from politics, along with Erkan’s appointment, suggests a potential shift away from what many economists consider “unorthodox” policies.
Analysts view these appointments as a promising sign that Erdogan’s administration may adopt a more sustainable direction for policymaking, particularly in terms of bringing down inflation through significant policy tightening.
