Istanbul Turkish President Recep Tayyip Erdogan has appointed a finance executive from the United States to head Turkey’s central bank. Hafize Gaye Erkan’s nomination was published in the Official Gazette on Friday. Erkan takes office just under a week after the president signaled a departure from unconventional fiscal policies with a new cabinet.
The former co-CEO of First Republic Bank and a managing director at Goldman Sachs must now change course and restructure fiscal policy after years of interest rate cuts and an ongoing economic crisis. As the fifth head of the central bank in four years, she replaces Sahap Kavcioglu. He led Erdogan’s interest rate cut policy and has now been appointed head of the state banking regulator BDDK. The First Republic Bank recently faced an existential crisis and was taken over by JP Morgan Chase in a bailout.
Up until now, Turkey had pursued an unusual economic course that did not correspond to general standards. Despite extremely high inflation, the central bank lowered interest rates instead of raising them in the fight against inflation.
Behind it is Erdogan, who describes himself as a “interest enemy” and wants to boost the economy with cheap money. As a result, the national currency, the lira, depreciated drastically, which in turn exacerbated the inflation problem. Turkey has to import many goods and raw materials, which are becoming more expensive due to the weak lira. Experts have warned the economy is headed for turmoil if current policies continue as its foreign exchange reserves are depleted.
Erdogan, who has been in power for 20 years, was recently sworn in for another term. The 69-year-old, who was partly behind in polls, got 52.2 percent of the votes in the runoff. His five-year term will allow Erdogan to continue his increasingly authoritarian policies. This polarized the country but strengthened Turkey’s position as a regional military power.
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