Turkey’s newly re-elected President Recep Tayyip Erdogan on Friday appointed former Wall Street executive Hafize Gaye Erkan as central bank governor, signalling a possible shift in his unconventional policies to fight inflation.
Erkan, a former co-CEO First Republic Bank and managing director at Goldman Sachs, will be the first woman to head the central bank.
Erdogan, who is starting a third term in office, unveiled a new cabinet on Saturday appointing Mehmet Simsek, a former Merrill Lynch economist, as finance minister.
Simsek — who worked as finance minister and deputy prime minister in the past ruling AKP governments — is known to oppose Erdogan’s unconventional policies of lowering interest rates in order to fight inflation.
Erkan — whose appointment was published in the official gazette on Friday — has taken over the post from Sahap Kavcioglu, who lowered rates even though central banks worldwide did the opposite to fight inflation.
Under Kavcioglu’s watch, the bank’s policy rate was decreased to 8.5 percent. It had been at 19 percent in 2021.
Turkey’s inflation rate dropped below 40 percent in May for the first time in 16 months.
Analysts say investors are less interest in how talented the new economic team is than their ability to resist pressure from Erdogan, who once called high rates “the mother and father of all evil”.
“Simsek & Erkan will be judged on monetary policy moves, inflation and lira,” emerging markets economist Timothy Ash said on Twitter.
Soon after taking office, Simsek said: “we have no choice but to return to rational ground” — a sign of shifting away from the low-rate policy.
The Turkish lira, which was propped up by the central bank before the presidential election in May, sank to a new low against the dollar on Wednesday.
“As we navigate through domestic and international challenges, we affirm our commitment to rules based policy making to enhance predictability,” Simsek said on Twitter after the lira’s fall.
“While there are no short cuts or quick fixes, rest assured that our experience, knowledge & dedication will help us overcome potential impediments ahead,” he tweeted.
“Our immediate priority is to strengthen our team and design a credible program.”
Erkan was born in Turkey and graduated from Istanbul’s top Bogazici University. She earned a PhD scholarship to Princeton.
She joined Goldman Sachs in 2005 as an associate and was named Managing Director in 2011.
She later worked at First Republic in 2014 where she earned the titles of senior vice president, chief investment officer and co-chief risk officer.
She was seen as the heir apparent to the First Republic Bank founder and longtime CEO Jim Herbert but left the lender in December 2021, before it was embroiled in the US banking crisis in March this year.
US financial authorities seized the California bank in May and sold it to JPMorgan Chase, hoping to bring an end to turmoil that brought down three other regional banks.