Hafize Gaye Erkan now runs the Turkish central bank

Dhe Turkish President Recep Tayyip Erdogan has appointed Hafize Gaye Erkan as the new governor of the central bank. The appointment of the fifth central bank chairman within four years was announced in the Official Journal. Erkan replaces Sahap Kavcioglu, whom Erdogan appointed in May 2021 because he was dissatisfied with his predecessor’s high interest rate policy. Erkan is the first female head of Turkey’s monetary authority. In terms of monetary policy, the 43-year-old has not made much of a name for herself. Kavcioglu, a loyal supporter of Erdogan, has been appointed head of the BDDK banking regulator.

Economists expect Erkan and the new Finance Minister Mehmet Simsek, who was appointed at the weekend, to correct the low-interest policy that has been pursued so far, which had lowered the key interest rate from 19 to 8.5 percent despite inflation of 40 percent recently.

Depletion of the government’s foreign exchange reserves and weakness of the lira, which had depreciated dramatically just this week, have been linked to this. On Friday morning, one dollar cost 23.48 lira, just below the all-time value of 23.53 lira per dollar. The US currency has gained 13 percent within a week.

How much independence does Erdogan grant?

Nick Stadtmiller, Head of Product at Medley Global Advisors, quoted Nick Stadtmiller, Head of Product at Medley Global Advisors, as saying Erkan’s success will depend on how much political autonomy she and the emergency gene bank will enjoy under Erdogan: “Hopefully Erkan’s appointment marks an improvement over the policies of her predecessor,” he said . But the question is “whether Erdogan will allow the central bank to raise interest rates enough to bring down inflation.”

Erdogan had repeatedly promised, even after his election, that interest rates would remain low in order to boost economic growth. This should increase exports and generate the foreign exchange that the country needs to close the large current account gap. So far, however, this policy has not worked. Analysts had seen the lira’s fall in the past few days as confirmation that the central bank had artificially maintained its course with interventions before the elections.

Erkan had already been traded as a contender for the post for the past few days. According to Turkish media reports, the financial manager, who was born in Turkey in 1982 and socialized in America, not only met with Simsek, but also with President Erdogan.

Until 2021 she was co-head of First Republic Bank

Erkan was trained as an industrial engineer in Turkey. In the United States, according to her LinkedIn entry, she quickly completed a doctoral program at Princeton and completed programs at Harvard Business School and Stanford University. Your resume indicates a Managing Director position at Goldman Sachs. She served as co-CEO of First Republic Bank in San Francisco for more than seven years before surprisingly stepping down more than a year ago.

That was soon enough not to be directly and personally linked to the bankruptcy of America’s largest bankruptcy institution since 2008. The bank, which was taken under the control of the regulators, was sold to JPMorgan. Erkan had moved on, to the board of insurance broker Marsh McLennan. In 2002, she was also appointed CEO of real estate finance and investment firm Greystone.

She obviously has no special experience in monetary policy. She is respected in New York’s financial industry and is “regarded as tough, smart and effective,” according to Reuters, quoting Kathryn Wylde, chair of Partnership for New York City, a nonprofit organization where Erkan once served on the board. “She’s certainly not someone to push around, but she can disagree without being awkward,” Wylde said.