Newly appointed Governor of the Central Bank of Turkey Fatih Callahan appears in Ankara, Turkey on February 4, 2024.
Emin Sansar | Anadolu | Getty Images
Turkey’s newly appointed central bank governor, Fatih Karahan, was appointed by presidential decree last weekend following the sudden resignation of his predecessor, Hafize Gaye Erkan. Its work is arduous.
Callahan, a former deputy governor of the central bank, has a resume that shows he has worked for well-known U.S. institutions and companies for many years. He received his master’s and doctorate degrees in economics from the University of Pennsylvania, worked as an economist at the Federal Reserve Bank of New York for nearly ten years, served as an adjunct lecturer at Columbia University and New York University, and served as a senior economist at Amazon.
The hope is that the 42-year-old economist’s experience will help the agency he heads as it works to address dizzying inflation and cost-of-living crises facing Turkey’s 85 million people. The country’s currency, the lira, has fallen 38% against the U.S. dollar so far this year and has fallen more than 80% against the U.S. dollar over the past five years.
Turkey’s consumer price index released on Monday showed an annual increase of about 65% in January. Since May 2023, China’s central bank has raised interest rates eight times in a row, totaling 3,650 basis points, in an effort to curb soaring inflation. The latest rate hike on January 25 raised Turkey’s key interest rate by 250 basis points to 45%, although Turkey’s leader signaled at the time that the rate hike cycle was over.
Despite the pain for the country, investors and economists say a rate hike is necessary and continuity in monetary policy priorities will bolster confidence in the new central bank governor.
in his statement Speaking on the Turkish central bank’s website on Sunday, Callaghan stressed “price stability” as his team’s top priority and vowed to “ensure deflation” and “maintain necessary monetary tightening until inflation falls to a level consistent with our goals.” level”.
“All eyes are now on how the new central bank governor will act,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a note on Monday. Fatih Karahan.” “As things stand, monetary policy continuity looks set to continue.”
Wolfgang Piccoli, co-president of Teneo Consulting, agrees.
“Like Elkann, Callahan is not a monetary economist but is still considered a solid choice,” Piccoli wrote in the firm’s analysis.
“Unlike the recent gubernatorial change, Elkann’s departure will not result in a significant shift in policy stance,” he said, adding that the central bank could still “adopt a more hawkish tone on forward guidance to support Callahan.” Take on a new role.”
unorthodox policies
Piccoli noted that Turkey’s monetary policy remains ultimately at the mercy of President Recep Tayyip Erdogan, who for years has stifled the central bank’s independence and prevented it from raising interest rates despite inflation. out of control, but he has been spooking investors for years. It once exceeded 85%.
Elkann and Turkish Finance Minister Mehmet Simsek, who was appointed last year, are moving toward a more traditional policy approach after years of unorthodox policies. Erdogan has previously decried interest rates as the “mother of all evil” despite soaring consumer prices and a plunge in the lira.
Turkish Central Bank Governor Hafize Gaye Erkan answers questions during a press conference on the 2023-III Inflation Report in Ankara, Turkey, July 27, 2023.
Anadolu Agency | Anadolu Agency | Getty Images
“Regardless of Callahan’s status and no matter how much support Finance Minister Mohammad Simsek provides, Erdogan remains the final decision-maker,” Piccoli said.
“As long as the president continues to support the (gradual) shift toward orthodoxy he endorsed after the 2023 elections, the identity of the governor will be almost irrelevant because TCMB has little, if any, institutional independence.”
Piccoli added that Callaghan “still has to operate within the confines of a central bank that is neither independent nor sufficiently professional”. CNBC has reached out to Türkiye’s central bank for comment.
Elkann became the first female central bank governor in Turkey’s history in June 2023, and investor confidence in Turkey improved during her roughly eight-month tenure. She unexpectedly announced her resignation on Friday, saying the decision was due to the “damage to the reputation” of the movement and the need to protect her family.
Elkann, like Callahan, has a resume that features elite colleges in the United States. She holds a Ph.D. With a PhD in financial engineering from Princeton University and business school degrees from Harvard and Stanford University, she later worked at Goldman Sachs and First Republic Bank, where she served as co-chief executive. She also serves on the board of directors of Tiffany & Co. and has been appointed as a director of professional services firm and Fortune 500 company Marsh McLennan.
