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 the Turkish Monetary Authority. In terms of monetary policy, it has so far made little of a name for itself. Kavcioglu, a loyal partisan of Erdogan, was appointed head of the banking regulator BDDK.
Andreas Mihm
Business correspondent for Austria, East-Central, Southeastern Europe and Turkey, based in Vienna.
- Follow I follow
Economists expect Erkan and the new finance minister Mehmet Simsek, who was appointed at the weekend, to correct the low interest rate policy they have pursued so far, which had lowered key interest rates from 40 to 19.8 percent despite inflation of 5 percent.
The depletion of government foreign exchange reserves and the weakness of the lira, which had depreciated dramatically only this week, are linked to this. On Friday morning, one dollar costs 23.48 lira, just below the all-time value of 23.53 lira per dollar. The U.S. currency has thus risen by 13 percent within a week.
How much independence does Erdogan grant?
Erkan's success will depend on how much political autonomy she and the central bank will enjoy under Erdogan, Bloomberg quoted Nick Stadtmiller, head of product at Medley Global Advisors, as saying: "Erkan's appointment hopefully marks an improvement over her predecessor's policies," he said. But the question is "whether Erdogan will allow the central bank to raise interest rates enough to bring inflation down."
Erdogan had repeatedly promised, even after his election, that interest rates would remain low in order to stimulate economic growth. The aim was to increase exports and generate the foreign currency that the country needs to close the large gap in the current account. So far, however, this policy has not worked. Analysts had seen the crash of the lira in recent days as a confirmation that the central bank had kept its course artificially high with interventions before the elections.
Erkan had already been traded in the past few days as a contender for the post. According to Turkish media reports, the financial manager, who was born in Turkey in 1982 and socialized in America, had met not only 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 U.S., according to her LinkedIn post, she completed a doctoral program at Princeton in a short period of time, as well as completed programs at Harvard Business School and Stanford University. Her CV shows the position of Managing Director at Goldman Sachs. For more than seven years, she was co-CEO of First Republic Bank in San Francisco before resigning unexpectedly more than a year ago.
That was early enough not to be directly and personally linked to the bankruptcy of America's largest credit institution since 2008. The bank, which had been taken under control by regulators, was sold to JPMorgan. Erkan had moved on to the board of directors of insurance broker Marsh McLennan. In 2002, she was also appointed CEO of the real estate finance and investment company Greystone.
Obviously, it does not have any special experience in monetary policy. She is respected in New York's financial industry and "is considered tough, smart and effective," as quoted by Reuters as saying Kathryn Wylde, chairwoman of Partnership for New York City, a nonprofit organization where Erkan once served on the board. "She's certainly not someone you can push around, but she can also disagree without being uncomfortable," Wylde said.