Turkey’s Musical Chairs: Erdogan Appoints Former Executive of Failed First Republic Bank as Central Bank Chief
Just when you thought the Turkish Lira couldn’t possibly plummet any lower…
In the latest round of musical chairs, Turkish President Erdogan, in the limelight from his recent reelection, has declared Hafize Gaye Erkan as the first-ever female governor of the Central Bank of the Republic of Turkey. Some hopeful souls are interpreting this as a possible transition back to traditional monetary policy (spoiler alert: it’s not).
Erkan is stepping into this role with quite a rap sheet: she was the co-CEO of the recently collapsed First Republic Bank and prior to that, she had a nice cubicle at Goldman Sachs. With this appointment— which was announced via a decree in the Official Gazette, she will become the fifth central bank governor in four years; however, by math, that means she should be ready to pack her bags by next Tuesday.
President Erdogan dismissed central bank governor Naci Agbal in March 2021, just two days after the central bank increased interest rates. Agbal was replaced by Sahap Kavcioglu, who will now oversee the Banking Regulation and Supervision Agency (BRSA) after Erkan takes over.
“Given her training at Princeton and her top-level experience in the U.S. banking sector, I assume that the new governor will return to orthodox policies,” Koç University economics professor Selva Demiralp told CNBC from Turkey. Meanwhile, Nick Stadtmiller from Medley Global Advisors, made an interesting observation. He said Erkan’s success hinges on how much policy independence she’ll have under Erdogan. Which basically means, will she get to play with the Monopoly money or will Erdogan keep all the fun to himself?
“Erkan’s appointment hopefully marks an improvement over the policies of her predecessor,” he said, as cited by Bloomberg. “The lingering question is whether Erdogan will allow the central bank to raise rates sufficiently to bring down inflation.”
Since Erdogan’s reelection, the Turkish lira has continued to devalue and most recently traded at 23.47 against the dollar. Inflation in the country remains a pressing issue, with May’s annual inflation rate registering at 39.6%. Back in October, inflation in Turkey had peaked at a staggering 85.5%.
Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
