2023-06-11 10:00:00
(BFM Bourse) – Turkish President Recep Tayyip Erdogan on Friday appointed Hafize Gaye Erkan, a former Wall Street executive as head of the Turkish central bank. Supporter of a more conventional monetary policy, its mission will be to stem the fall of the Turkish lira and inflation which in May still reached almost 40% over one year.
Turkish President Recep Tayyip Erdogan on Friday appointed a former Wall Street executive, Hafize Gaye Erkan, as head of the Turkish central bank, auguring a possible shift towards a more conventional policy to fight inflation.
Ex-number 2 of the American bank First Republic and former executive of Goldman Sachs, she is in favor of a return to financial orthodoxy. Hafize Gaye Erkan defends in particular the raising of the key rates to counter inflation, which still reached in May nearly 40% over one year in Turkey.
This holder of a doctorate from the prestigious American University of Princeton becomes the first woman to lead the Turkish central bank.
President Erdogan, re-elected on May 28 for a third term, had already appointed a new Minister of Economy, Mehmet Simsek, last week. The former economist of the American bank Merrill Lynch, highly respected in the business community, also promotes a return to orthodoxy to restore stability and regain investor confidence.
When taking office on Sunday, Mehmet Simsek, already Minister of the Economy (2009-2015) then Deputy Prime Minister in charge of the Economy (until 2018), warned that it would be necessary to return to “measures rational” to revive the Turkish economy.
A heterodox monetary policy
President Erdogan, who believes contrary to conventional economic theories that high interest rates promote inflation, has forced the Turkish central bank in recent years to lower its main key rate, contributing to the outbreak of inflation. Recep Tayyip Erdogan has repeatedly invoked the precepts of Islam, which prohibits usury, and claims that the high rates are promoted by a foreign “lobby”.
“Simsek and Erkan will be judged on shifts in monetary policy, inflation and the pound,” said Timothy Ash, emerging market analyst at BlueBay. “Erkan will have to undertake a major cleaning at the Turkish central bank to put the + rational + thinkers back in a dominant position,” he believes.
Hafize Gaye Erkan was considered the heiress of longtime First Republic founder and CEO Jim Herbert, but the 40-year-old left the US bank in late December 2021, before she became embroiled in the US banking crisis in March. .
President Erdogan’s heterodox policy, which he continued to defend throughout the campaign for the presidential and legislative elections in May, also contributed to the fall of the Turkish lira, which lost nearly 80% of its value. once morest the dollar in five years.
On Wednesday, the Turkish currency, massively supported by the central bank before the elections, fell by more than 7% once morest the dollar and theeuro.
Turkey’s central bank spent nearly $30 billion to support the Turkish lira between January 1 and the presidential election, pushing its foreign exchange reserves into negative territory for the first time since 2002. The institution will announce its next key rate on June 22.
Analysts believe that a sharp hike in the main policy rate, currently stable at 8.5% since late February, might help get Turkey’s economy back on track.
(With AFP)
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