ISTANBUL BLOG: All hail Turkey’s new central bank governor!

ISTANBUL BLOG: All hail Turkey’s new central bank governor!
And the cleared desk goes to... Fatih Karahan. / Official release
By Akin Nazli February 5, 2024

“The king is dead, long live the king!” might be the best description when it comes to the latest change in the identity of Turkey’s central bank chief.

When now ex-central bank governor Hafize Gaye Erkan was appointed to the post in June last year, the finance industry and financial media saw the development as extremely “positive”.

When Fatih Karahan on February 2 replaced Erkan after she was fired (according to the Official Gazette) or resigned (according to her statement on X) amid what she claimed was a “smear campaign”, the financial industry also deemed this development “positive”.

JPMorgan led the applause.

Turkey’s central bank would be “likely more hawkish” in the latest era and Karahan’s appointment “is positive for the disinflation and the lira,” said the investment bank.

Morgan Stanley and HSBC  also commented. The change in governor would not bring on a policy shift, they said.

For his part, Karahan on February 4 issued a statement to stress that the central bank would be “determined to maintain the necessary monetary tightness until inflation falls” and stood “ready to act in case of any deterioration in the inflation outlook”.

He also attached his CV to his first statement as governor. It appears to have charmed the financial media as much as Erkan’s CV did.

All in all, although this publication made the mistake of expecting some logic from the Erdogan regime on January 19 and added to its wrongheadedness on January 24 by taking some words from Erdogan a wee bit too seriously, at least the relayed anticipation of no policy change still holds—as of the moment.

As is usual in Turkey, the exact cause of this high-profile exit cannot be pinned down. What was really so serious that it required a change of governor?

Finance minister Mehmet Simsek implied in a statement that he offered Erdogan Karahan. According to Erdogan, the offer of Erkan also came from Simsek.

Karahan looks like he’ll prove a more obedient kid. If he keeps his father away from the central bank (read up on Erkan’s demise if you haven’t already) and avoids talking to the media about his family (Erkan not only found that her father had become a tasty morsel for the tabloids, but her mother too), he may last a lot longer than his predecessor.

So where are we? At the end of the day, Simsek has proven himself the boss of economic policy. But. The boss of the boss of economic policy could at any time decide that the rear of the boss of economic policy should feel the kick of the presidential boot. Sure, these things happen in Turkey all the time. Pay for a subscription. Check our archives. You could potentially save yourself a fortune.