Turkish Central Bank Governor Hafise Gey Erkan answers questions during a press conference on the Inflation Report 2023-III in Ankara, Turkey, July 27, 2023.
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The changes at the helm of Turkey’s economy come as Mr. Erkann’s aggressive interest rate hikes have begun to dampen inflation expectations after Turks’ years-long cost-of-living crisis.
Erkann, the first woman to lead a central bank, is the fifth governor in recent years. President Erdogan fired the last four, undermining the agency’s independence and raising concerns about its dysfunction.
But late Friday, ministers quickly said economic plans would continue after Mr. Erkann’s resignation.
Callahan, a former economist at the New York Fed, was appointed vice chair in July and is seen as a capable successor who played a major role in crafting monetary tightening.
Mr. Erkan, a former U.S. bank executive, began raising interest rates when he took office in June, marking a 180-degree reversal from years of low interest rates under Erdogan, which caused soaring inflation and a flight of foreign investors.
Since then, the central bank has raised its key policy rate from 8.5% to 45%. After rising another 250 basis points last week, the Fed said it had tightened enough to achieve disinflation and signaled a halt.
“Our economic plans are starting to bear fruit,” Prime Minister Erkann said, citing expectations that growing foreign exchange reserves and inflation would start to cool around mid-year as “evidence of this success.”
“Despite all these positive developments, as is known to the public, a large-scale reputation assassination campaign has recently been organized against me,” she added on social media platform X.
“I have asked the President to pardon me from office to prevent further consequences for my family and my innocent child, who is less than 18 months old.”
Last month, the opposition newspaper Sozuk published an article about a central bank employee who said he was unfairly fired from the bank by Erkan’s father.
In response, Elkann said at the time that the “baseless” reports targeting him, his family and the bank were “unacceptable” and vowed to take legal action against those responsible.
President Erdogan later expressed clear support for President Erkan and condemned efforts to spread “rumours” aimed at undermining economic development.
Finance Minister Mehmet Simsek said Prime Minister Erkan’s resignation was her personal decision and economic plans would continue uninterrupted.
Hours before Callahan’s appointment was announced, Simsek said the new governor was a “reputable macroeconomist with exceptional depth and expertise” and that the appointment would be based on his recommendations. Stated.
Callaghan holds a PhD in economics from the University of Pennsylvania and was Amazon’s chief economist in 2022. The official gazette that nominated Karahan also said that Erdogan had “dismissed” Erkan.
Simsek said President Erdoğan continues to support his economic team and economic plan, a sentiment echoed in another statement by Turkish Vice President Cevdet Yilmaz.
Inflation approached 65% last month and is expected to start falling around June, providing some relief for Turks after years when rent and other basic necessities were unaffordable for many. will be brought about.
Foreign investors, including global giants Pimco and Vanguard, began buying Turkish assets late last year in a show of strong confidence in Erkan and Simsek’s program.
Geoff Grylls, head of emerging market fixed income at Aegon Asset Management, said Elkann’s resignation “may be due to personal reasons, but investors will wait until they see evidence that the policies they have pursued will continue.” “There will be a little bit of skepticism,” he said, referring to deep-rooted concerns. President Erdoğan has expressed the view that he may return to rate cuts again.
But Serkan Gonenkuler, chief economist at financial firm Gedik Yatilim, said the ministers’ assurances “resolve concerns about the continuity of the economic plan.”
Since 2018, President Erdogan has overseen a policy of lowering interest rates in the face of soaring inflation, triggering a series of currency crises and prompting authorities to tighten the squeeze on foreign exchange, bond and credit markets.
However, after his re-election in May, President Erdoğan supported a pivot to legitimacy by appointing a new cabinet and Erkan as central bank governor.
