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Turkey central bank governor quits and points to campaign against her

Turkey’s central bank governor, Hafize Gaye Erkan, resigned from her position after overseeing a significant campaign of interest rate hikes. Erkan, who became the bank’s first female chief in June, attributed her departure to what she described as weeks of unwarranted attacks in the local media.

Her successor, according to Turkey’s official gazette, will be deputy governor Fatih Karahan, a former economist from the Federal Reserve. Karahan marks President Recep Tayyip Erdoğan’s sixth central bank chief in five years.

Erkan stated on Friday evening, “A major character assassination campaign has been organized against me recently,” and she resigned to protect her family from further impact, especially her child.

As a former Goldman Sachs banker, Erkan played a crucial role in implementing an extensive economic policy overhaul initiated after Erdoğan’s re-election in May. This overhaul received praise from foreign investors who had largely withdrawn from Turkey’s markets over the past decade.

Under Erkan’s leadership, the central bank raised interest rates from 8.5% in June to 45% in an effort to combat an extended inflation crisis. This marked a reversal of the longstanding policy of maintaining ultra-low borrowing costs. Erdoğan, despite his previous stance against high interest rates, seemed to support these increases.

Erkan faced criticism in recent weeks over allegations that her father had been given an unofficial role at the central bank and had dismissed an employee. She vehemently denied these accusations, deeming them “unfounded” and “completely unacceptable.”

Erdoğan had seemingly supported Erkan just last week, accusing unnamed assailants of attempting to disrupt the achieved economic stability with baseless rumors.

Karahan’s promotion to central bank chief, following his appointment as deputy governor in July 2023, aims to allay concerns that the president might abruptly change economic policy, as he has done previously.

Hakan Kara, a former Turkish central bank chief economist, expressed his confidence in Karahan, describing him as a respected expert among the institution’s employees. Another local banker praised Karahan as a “credible” choice, noting his previous experience as a New York Fed economist for nearly a decade.

Finance Minister Mehmet Şimşek, leading the economic turnaround efforts since June, reassured on Friday evening that the program “continues without interruption and with determination.” He emphasized Erdoğan’s full support and confidence in the economic team and the implemented program.

Emre Peker, Europe director at the risk advisory Eurasia Group, anticipated no policy changes through the local elections scheduled for late March.

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