Fatih Karahan has been appointed as the new head of Turkey’s central bank, replacing Hafize Gaye Erkan, who resigned abruptly amid allegations of a smear campaign against her and her family. Unlike previous changes driven by President Recep Tayyip Erdogan’s preference for lower interest rates, market analysts anticipate Karahan to adopt a more hawkish stance. JPMorgan and Morgan Stanley express optimism, emphasizing Karahan’s potential positive impact on disinflation and the lira.
Karahan, with over a decade of experience as a professional economist in the U.S., including at the Federal Reserve Bank of New York and Amazon.com, is expected to postpone interest-rate cuts until at least the end of the year. His background in labor and inventory efficiency research at Amazon aligns with a commitment to tight monetary policies. Analysts predict continuity in economic policies initiated under Erkan, emphasizing a pivot to orthodoxy.
Treasury and Finance Minister Mehmet Simsek endorses Karahan, indicating that policies aligning with mainstream approaches will persist. The expectation is for Karahan to issue a strong statement in support of tight monetary policies during his first public appearance on Feb. 8. Analysts believe Simsek’s continued influence is crucial for charting Turkey’s economic course.
Bloomberg Economics suggests that the central bank is likely to maintain or hike rates under Karahan if the inflation outlook worsens. Karahan’s macroeconomic expertise, complemented by teaching roles at prestigious institutions, positions him as a key figure in Turkey’s economic landscape. His appointment reflects a departure from earlier discussions of a deputy minister role, aligning him more closely with the central bank’s responsibilities.
Erkan, the outgoing governor, played a pivotal role alongside Simsek in a significant economic policy shift, raising interest rates by 3,650 basis points to 45% to tackle soaring inflation. Market expectations anticipate high inflation levels in January, with the central bank’s survey projecting a year-end decline to around 42.1%. The leadership change raises hopes for a continued commitment to disinflation and stability in Turkey’s economic policies.
