Economic policy to continue as Central Bank's new head takes helm: Top officials

ANKARA

Top government officials have assured that the economic program will continue after a new governor is appointed to the Central Bank.

Hafize Gaye Erkan, the country’s first female Central Bank governor, announced her resignation late on Feb. 2 after less than a year in the job.

Only hours later, Fatih Karahan, a former Federal Reserve Bank of New York economist, was appointed to replace Erkan.

“The decision made by Erkan is entirely personal and at her own discretion. We respect her decision and are grateful for her service,” Finance Minister Mehmet Şimşek wrote on X on Feb. 2.

The support and confidence of President Recep Tayyip Erdoğan in the economic team and the program are unwavering, Şimşek said.

“The new governor, who is a well-respected macroeconomist with an extraordinary depth of knowledge and expertise, will be appointed in line with my recommendation,” Şimşek wrote before Karahan’s appointment by Erdoğan was published in the Official Gazette.

“As a team, we are committed to implementing our disinflation program and take necessary steps to achieve price stability,” Şimşek added.

The medium-term program, which has the president’s strong support, will continue to be implemented decisively, Vice President Cevdet Yılmaz said.

Karahan had been acting as deputy Central Bank governor since July last year.

He started his career as an economist at the Federal Reserve Bank of New York in 2012. He also lectured at Columbia University and New York University. In 2022, he became a senior economist at Amazon and was later appointed as the principal economist of the company.

"A major reputation assassination campaign has recently been organized against me," Erkan said in a social media statement announcing her resignation.

She added that she was stepping down "in order to prevent my family and my innocent child, who is not even one-and-a-half years old, from being further affected by this process."

First public appearance

Karahan is expected to make his first public appearance on Feb. 8, when he presents the bank’s quarterly inflation report, which will include the bank’s inflation projections.

He will also take questions from reporters and analysts at the presentation.

The latest governor change does not signal a change in policy direction or a political preference for lower interest rates, Morgan Stanley commented in a note on the appointment of Karahan.

“We expect the Central Bank to continue with a conventional monetary policy framework that prioritizes inflation. We will have a chance to listen to his [Karahan] policy messages during the inflation report presser,” it said.

“We see the new Central Bank governor as positive for disinflation and lira… We think that the reshaped Monetary Policy Committee is likely more hawkish,” said another investment bank JP Morgan.

They expect that Karahan will deliver hawkish forward guidance in the inflation report press briefing, if not earlier, JP Morgan added.