Turkish President Recep Tayyip Erdoğan on Friday appointed former Wall Street chief financial officer Hafize Gaye Erkan as governor of the central bank, signaling a possible shift in his unconventional anti-inflationary policies.
Thus, the former CEO of the “Greystone” real estate finance company, the former co-CEO of the First Republic Bank (First Republic Bank), and the general manager of Goldman Sachs, will be the first woman to assume the position of governor of the Central Bank of Türkiye.
Erkan, whose appointment was published in the Official Gazette on Friday, takes over the position to succeed Şahap Kavcıoğlu, who cut interest rates despite central banks around the world doing the opposite to counter inflation.
Under Kavcıoğlu, the bank reduced the interest rate to 8.5%, while the rate was 19% in 2021.
The inflation rate in Türkiye fell below 40% in May for the first time in 16 months.
Some independent experts believe that it is much higher — more than 100%.
Erdoğan, who has begun a third presidential term, unveiled his new government on Saturday and appointed Mehmet Şimşek, a former Merrill Lynch economist, as finance minister, in another sign of a policy shift.
It’s known that Şimşek, who was previously Minister of Finance and Deputy Prime Minister in previous governments led by the ruling Justice and Development Party, opposes Erdoğan’s unconventional policies of lowering interest rates to counter inflation.
Analysts point out that investors are not interested in the degree of talent of the new economic team as much as they are interested in their ability to resist pressure from Erdoğan, who has previously described high interest rates as the basis of all evil.
The Turkish currency exchange rate fell 1.6% against the US dollar on Friday, after falling to a new record on Wednesday.
Erdoğan has in the past sacked central bank governors after disagreements over interest rates, a move that unnerved investors.
Shortly after taking office, Şimşek said, “We’ve no choice but to return to rationality,” indicating a move away from the policy of low rates.
“While we face internal and international challenges, we affirm our commitment to rule-based decision-making to enhance the ability to make predictions,” Şimşek said on Twitter after the lira’s decline.
“There are no shortcuts or quick fixes… Rest assured that our experience, knowledge and dedication will help us overcome any potential obstacles,” he added.
“Our priority is to strengthen our team and to design a program that can be trusted,” he said.
Erkan was born in Türkiye and graduated from the prestigious Boğaziçi University in Istanbul.
She won a scholarship to study for a doctorate at Princeton, USA.
In 2005, she joined Goldman Sachs as an Associate, and was appointed Director in 2011.
She later worked at First Jumhouria Bank in 2014, where she held the positions of Senior Vice President, Chief Investment Officer, and Chief Risk Officer.
Many saw her as the potential heir to the founder and CEO of the First Republic Bank, Jim Herbert, but she suddenly left the bank in December 2021.
“It was time for change and for a new challenge,” Erkan told Bloomberg TV last year.
The bank affected by the American banking crisis in March of that year.
Erkan was appointed CEO of Greystone in June 2022, but she resigned in December.
The company confirmed at the time that its departure was “friendly” and “related to its decision to focus on new opportunities in the financial sector”.