President Erdoğan has appointed Hafiz Kaye Ergan as the Chairman of the Central Bank.
Ergon is the first woman governor of the bank and the fifth in four years. Former central bank chief Şahap Kavcıoğlu has been appointed head of Turkey’s Banking Regulation and Supervision Agency (BDDK).
President Recep Tayyip Erdoğan on June 9 appointed Hafiz Kaye Ergan, an American financial executive, to head Turkey’s central bank, widely expected to reverse course and tighten policy after years of interest rate cuts and a simmering cost-of-living crisis.
Ergan is the first woman governor of the central bank and is serving her fifth term in four years. This underscores the challenge of bringing about lasting policy change after Erdogan dismantled banking independence in recent years.
The 41-year-old replaces Şahap Kavcıoğlu, who presided over Erdogan’s rate cuts that triggered a historic currency devaluation in 2021 and pushed inflation last year to more than 85%, a 24-year low.
“The key question for Ergon will be whether he is free to steer monetary policy in the direction of ‘rational policy,'” said Selva Demirolf, professor of economics at Kos University and former economist at the US Federal Reserve.
Ergon’s biases on Wall Street and in the boardrooms of corporate America are unclear because he lacks formal monetary policy experience. She has a Ph.D. from Princeton University in Financial Engineering.
Analysts now expect the Turkish central bank to raise interest rates this month from 8.5% to 20% to 25%.
Such a turnaround in the economy comes at a time when many analysts expect unrest from dwindling foreign reserves, uncontrolled inflation and a large current account deficit.
Enemy of interest
Erdogan, a self-proclaimed “enemy” of interest rates, has been pushing the central bank for stimulus measures in recent years. He had previously embraced orthodoxy and soon recanted.
In 2021, the central bank cut its policy rate from 19% to 8.5%, turning real rates sharply negative and governing the lira with mostly a dozen debt and foreign exchange rules.
But after Erdogan survived his toughest political test in a May 28 runoff, on June 3 he appointed a respected and conservative former finance minister, Mehmet Simsek, as minister in charge of the economy.
Shimsek met with Erkan earlier this week.
The lira fell to an all-time low this week amid record low foreign reserves of $5.7 billion. On June 7 alone, the lira fell 7.2% and after Ergan’s appointment on June 9, the lira traded at 23.5 against the dollar.
Source: Turkish media
