Turkey appoints Fatih Karahan as new central bank chief after Erkan resigns

The appointment comes a few hours after the resignation of Hafize Gaye Erkan citing a media scandal.

Hafize Gaye Erkan, Co-CEO, First Republic Bank
Hafize Gaye Erkan had taken over the reins of Turkey's central bank in June last year [File: Business Wire via AP]

President Recep Tayyip Erdogan has named the central bank’s Deputy Governor Fatih Karahan as its new head following the resignation of the chief, Hafize Gaye Erkan.

The appointment of the former senior economist at the US online retail giant Amazon was announced in the Official Gazette early on Saturday, hours after Erkan said she was stepping down partly due to the need to protect her family amid a media scandal.

Cabinet leaders quickly said the economic programme that had begun cooling inflation expectations after a years-long cost-of-living crisis would carry on under Karahan, who is seen as having played a key role in engineering the monetary tightening.

The first woman to lead the bank, Erkan began raising interest rates when she was appointed in June last year, launching a 180-degree pivot away from years of low rates under Erdogan that had sent inflation soaring and foreign investors fleeing.

Since then, the central bank has hiked its key rate to 45 percent from 8.5 percent. Last week, after another 250-basis-point rise, it said it had tightened enough to achieve disinflation, signalling a halt.

In her statement announcing the resignation, Erkan said “our economic programme has started to bear fruit”, citing rising foreign reserves and expectations that inflation will begin cooling around midyear “as proof of this success”.

“Despite all these positive developments, as is known to the public, a major reputation assassination campaign has recently been organised against me,” she added on X.

“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, I have asked our President to pardon me from my duty.”

Last month, the opposition newspaper Sozcu published an article about a central bank employee who said she was wrongfully dismissed from the bank by Erkan’s father.

In response at the time, Erkan said an “unfounded” news story targeting her, her family and the bank was “unacceptable” and said she would exercise her legal rights against those responsible.

Erdogan later decried efforts to spread “rumours” meant to undermine economic progress, in an apparent endorsement of Erkan, the bank’s fifth governor in as many years.

Finance Minister Mehmet Simsek said Erkan’s resignation was her personal decision and the economic programme would continue uninterrupted.

Karahan has a doctorate in economics from the University of Pennsylvania and was also a former Federal Reserve Bank of New York economist.

Simsek said Erdogan continues to back the economic team and programme, a sentiment echoed in a separate statement by Turkish Vice President Cevdet Yilmaz.

Inflation neared 65 percent last month and is expected to begin dipping around June, spelling some relief for Turks after years in which rent and other basic needs became unaffordable for many.

Foreign investors, including world heavyweights Pimco and Vanguard, began buying Turkish assets late last year in a strong signal of confidence in Erkan and Simsek’s programme.

Source: Al Jazeera and news agencies