The head of the Central Bank of Turkey resigns and Erdogan appoints his sixth governor in 5 years | Economy | EUROtoday

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Head of the Central Bank of Türkiye
Galata Bridge, Istanbul.Eric TEISSEDRE (GETTY IMAGES)

The place of governor of the Central Bank of Turkey has grow to be one of the unstable positions within the Eurasian nation, on account of the altering financial insurance policies promoted by the Government of Recep Tayyip Erdogan. On the night time of Friday to Saturday, the present governor, Hafize Gaye Erkan, introduced her resignation, alleging a “smear campaign against her” after the publication of data that accused her of nepotism. President Erdogan instantly appointed one of many vice presidents, Fatih Karahan, as his alternative, who would be the sixth individual to carry the place within the final 5 years.

“A campaign to assassinate my reputation has been organized. To prevent my family and my innocent son, who is not even a year and a half old, from being even more affected by this, I have requested our President to relieve me of my duties, which I have been fulfilling with honor since day one,” Erkan announced on the social network X, commonly known as Twitter.

Several opposition parties had called for his departure after the newspaper spokesman published various information about the practices of the Erkan family in the Central Bank. This newspaper reported the complaint of an employee, Büsra Bözkürt, who appealed to the Turkish president after being fired supposedly due to pressure from the governor's father, Erol Erkan, who had reproached her for not wanting to work beyond her working day. According to complaints collected by spokesman and other means, the governor's parents would have settled in the headquarters of the Central Bank – in principle to help the governor in raising her baby – and her father walked around the institution giving orders to the employees. It has also been published that the family would have used for their private use the bank's recreational facilities that are normally used by employees, who would have been prevented from entering.

The governor denied that these events were true and even President Erdogan came to her defense, accusing opposition newspapers of orchestrating a campaign “to break the climate of trust and stability achieved,” however he has lastly thrown within the towel. Erkan, the primary lady to carry the place within the historical past of Turkey, was positioned on the head of the Central Bank final June, with the duty of righting the nation's financial scenario along with the brand new Minister of Finance, Mehmet Simsek, after a number of years of experiments in financial coverage which have left inflation sky-high (64%) and had emptied the establishment's reserves.

Aggressive rate hike

The governor embarked on an aggressive policy of increasing interest rates, taking them from 15% to 45%. After the last increase decreed by the monetary policy council of the Central Bank, at the end of January, Erkan had given signals that there would be no future increases because the trend of rising prices is beginning to slow down. The Bank's forecasts indicate that around May the inflation rate will reach its peak, at 70% and, from there, it will begin to moderate to reach 35-40% at the end of this year.

These measures have allowed there to be a certain monetary stability without the need to burn the Central Bank's reserves, which has allowed them to recover in just over half a year and even reach record figures. With this, Erkan and the Ministry of Finance team had earned the trust of international markets and the financial sector, although other business sectors accuse this aggressive policy of having suffocated the economy, making credit difficult.

Minister Simsek commented that Erkan's departure has been a “personal decision” and assured that the new governor is a “highly respected macroeconomist with a great depth of knowledge and experience” and that he has been appointed following the recommendations of the Minister of Finance. Karahan worked for a decade as an economist at the Federal Reserve Bank of New York and has been chief economist at e-commerce giant Amazon. Therefore, it is not expected that there will be significant changes in the direction of the Turkish Central Bank's monetary policy.

In fact, no matter how much the laws say so, the Central Bank ceased to be an independent institution in Turkey years ago, and currently acts in line with what was decided by the “economic czar” Simsek, who for the moment has the approval from Erdogan. Since the entry into force of the Turkish presidential system in 2018, which concentrated power in the hands of the president, he has been the one who has given the guidelines on how to manage Turkey's economic and monetary policy, alternating periods of tremendously heterodox policies with others. of highly orthodox policies.

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