Recep Tayyip Erdogan appoints former Goldman Sachs banker to head Turkey’s central bank

Recep Tayyip Erdoğan has appointed a former US banker as the country’s central bank chief in the latest sign that Turkey’s president may change course on his unorthodox policies that have ignited a painful cost of lives crisis and plunged the lira to the dollar. Sent to a record decline against. ,

Hafize Gay Erkan, who has held senior roles at Goldman Sachs as well as failed regional US lender First Republic, will be the first woman to head Turkey’s central bank. She will take over the reins from Sahap Cavacioğlu, who at the behest of Erdoğan drastically cut interest rates.

The president’s decision to tap Erkan came just days after he picked former deputy prime minister Mehmet Şimşek, popular with global investors, as finance minister. He also appointed Cevdet Yilmaz, who is seen as a supporter of conservative economic policies, as vice president.

The appointments have stoked cautious optimism among investors that Erdogan, who was re-elected on May 28, will turn to a more conservative policy as Turkey’s economy faces acute stress.

Erdoğan, a lifelong opponent of high borrowing costs, has prompted the central bank to slash its main interest rate to 8.5 percent from 19 percent two years ago, a move blamed for sparking an inflation crisis and sending the lira has been ordained. fall against the dollar.

Investors and economists have said Turkey should raise rates significantly to slow price rises and entice foreign investors who have fled the country in recent years.

Since it became clear that Simsek would be appointed finance minister, the price of Turkish dollar-denominated bonds has increased, while the cost of protecting against Turkey’s debt default has decreased. But many investors are still awaiting clarity on the policy before taking a call.

Erkan holds a PhD in financial engineering and operations research from Princeton University and led Financial Institutions Group analysis at Goldman before spending nearly eight years as a senior executive at First Republic.

The 44-year-old Turkish-American had a sad end to his tenure at the First Republic, where he was appointed co-chief executive in July 2021 before exiting the lender by the end of the year. First Republic was bought by JPMorgan this year in a fire sale after it ran on deposits held by its wealthy clients.

Erkan will face the deepening crisis of the economy. The central bank has drawn some $25 billion in foreign exchange reserves this year to meet a growing current account deficit, with many economists warning that Turkey’s war fund is dangerously depleted.

He will also need to contend with a lira that is under heavy pressure, after accounting for inflation that plunged more than 60 percent over the past two years after Erdoğan’s rate cuts drove interest rates into deep negative territory. .

Recep Tayyip Erdoğan has appointed a former US banker as the country’s central bank chief in the latest sign that Turkey’s president may change course on his unorthodox policies that have ignited a painful cost of lives crisis and plunged the lira to the dollar. Sent to a record decline against. ,

Hafize Gay Erkan, who has held senior roles at Goldman Sachs as well as failed regional US lender First Republic, will be the first woman to head Turkey’s central bank. She will take over the reins from Sahap Cavacioğlu, who at the behest of Erdoğan drastically cut interest rates.

The president’s decision to tap Erkan came just days after he picked former deputy prime minister Mehmet Şimşek, popular with global investors, as finance minister. He also appointed Cevdet Yilmaz, who is seen as a supporter of conservative economic policies, as vice president.

The appointments have stoked cautious optimism among investors that Erdogan, who was re-elected on May 28, will turn to a more conservative policy as Turkey’s economy faces acute stress.

Erdoğan, a lifelong opponent of high borrowing costs, has prompted the central bank to slash its main interest rate to 8.5 percent from 19 percent two years ago, a move blamed for sparking an inflation crisis and sending the lira has been ordained. fall against the dollar.

Investors and economists have said Turkey should raise rates significantly to slow price rises and entice foreign investors who have fled the country in recent years.

Since it became clear that Simsek would be appointed finance minister, the price of Turkish dollar-denominated bonds has increased, while the cost of protecting against Turkey’s debt default has decreased. But many investors are still awaiting clarity on the policy before taking a call.

Erkan holds a PhD in financial engineering and operations research from Princeton University and led Financial Institutions Group analysis at Goldman before spending nearly eight years as a senior executive at First Republic.

The 44-year-old Turkish-American had a sad end to his tenure at the First Republic, where he was appointed co-chief executive in July 2021 before exiting the lender by the end of the year. First Republic was bought by JPMorgan this year in a fire sale after it ran on deposits held by its wealthy clients.

Erkan will face the deepening crisis of the economy. The central bank has drawn some $25 billion in foreign exchange reserves this year to meet a growing current account deficit, with many economists warning that Turkey’s war fund is dangerously depleted.

He will also need to contend with a lira that is under heavy pressure, after accounting for inflation that plunged more than 60 percent over the past two years after Erdoğan’s rate cuts drove interest rates into deep negative territory. .