Turkiye central bank chief quits, citing family reasons

ISTANBUL: Turkiye’s central bank governor Hafize Gaye Erkan resigned last Friday, citing a need to protect her family amid a “reputation assassination”, and she was swiftly replaced by a deputy who is expected to carry on her tight policy stance.

President Tayyip Erdogan – who hired Erkan eight months ago to pivot away from years of inflation-fuelling low interest rates to a more orthodox policy – named deputy governor Fatih Karahan to take the reins, the Official Gazette said early last Saturday, two hours after the surprise resignation.

The personnel changes at the helm of Turkiye’s economy came as Erkan’s aggressive interest rate hikes had begun cooling inflation expectations after a years-long cost-of-living crisis for Turks.

The first woman to lead the central bank, Erkan was its fifth governor in as many years. Erdogan fired the last four, eroding the institution’s independence and sowing concerns about dysfunction.

But late last Friday, Cabinet leaders quickly said that the economic programme will carry on after Erkan’s departure.

Karahan, a former US Federal Reserve Bank of New York economist, was appointed deputy in July and is seen as a capable successor who played a big role in engineering the monetary tightening.

Erkan, a former US bank executive, began raising rates when she was appointed in June, 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 had hiked its key rate to 45% from 8.5%. Last week, after another 250 basis-point rise, it said it had tightened enough to achieve disinflation, signalling a halt.

Erkan said that “our economic programme has started to bear fruit”, citing rising foreign reserves and expectations that inflation will begin cooling around mid-year “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 social media platform 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, 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 that an “unfounded” news story targeting her, her family and the bank was “unacceptable” and vowed to exercise her legal rights against those responsible. — Reuters