Türkiye has reshuffled the management of its central bank as it removed three deputy governors and named their replacements, the country's Official Gazette said early Friday, marking the latest overhaul after a change in policy course since May elections.
The appointment of Osman Cevdet Akçay, Fatih Karahan and Hatice Karahan as deputy Central Bank of the Republic of Türkiye (CBRT) governors came a day after the monetary authority vowed to continue gradual monetary tightening and raised its end-2023 inflation forecast.
Fatih Karahan, who has a University of Pennsylvania economics PhD, worked as an economist at the Federal Reserve Bank of New York for almost a decade and most recently worked for Amazon as a principal economist, the central bank said.
Akçay is an economist who used to work at Turkish private lender Yapı Kredi and has a PhD from the City University of New York.
Hatice Karahan, with an economics PhD From Syracuse University, is an academic and a chief economic adviser to President Recep Tayyip Erdoğan.
The removed deputies included Emrah Şener, Taha Çakmak and Mustafa Duman, the decision in the Official Gazette said.
Tim Ash, a strategist at BlueBay Asset Management, hailed the latest appointments as "superb hires."
"Cevdet is a superb economist and clear thinker. Hatice is excellent as well – a rational, orthodox thinker. Fatih Karahan, ex-NY Fed. Superb hires," Ash said.
Türkiye's international government bonds rallied after the appointments, gaining as much as 1.3 cents on the dollar, lifting most of the bonds back to levels they had been at before Erdoğan won May's presidential election.
The Turkish lira stood at 26.9535 against the United States dollar on Friday morning, little changed from Thursday's closing level. It has lost 30% of its value this year.
The move marked the latest major reshuffle since Erdoğan extended his rule into the third decade.
He named Mehmet Şimşek, the respected veteran policymaker, as Treasury and Finance minister, and Hafize Gaye Erkan, a former Wall Street banker, as the central bank governor.
The naming of Şimşek and Erkan marked an initial sign that Ankara would revamp policies centered around monetary stimulus and opt for interest rate hikes to combat stubborn inflation, stabilize the volatility in the Turkish lira and rebuild foreign exchange reserves.
Under Erkan, the central bank has reversed course and tightened policy in the last two months. Since Erkan's arrival in early June, the bank raised its one-week repo rate by 9 percentage points to 17.5%. It marked a reversal from an easing drive that saw the CBRT cut its official borrowing costs to 8.5% from 19% since 2021.
The bank has also begun to simplify macroprudential measures and has supported the rate hikes with qualitative and selective credit tightening.
Türkiye's annual inflation cooled to 38.21% in June, having peaked at a 24-year high of 85.5% in October last year.
Erkan pitched a comprehensive monetary policy in her first formal address to the media on Thursday while her acknowledgment of stark inflation pressures was welcomed by foreign investors.
Unveiling the third quarterly inflation report of the year, Erkan said the central bank raised its end-2023 inflation forecast sharply to 58%, vowing to continue gradual monetary tightening. The bank's year-end forecast in its previous inflation report three months ago was 22.3%.
Erkan said the bank's inflation forecast for the end of 2025 was 15% and that it would continue to raise interest rates, alongside quantitative tightening. The end-2024 inflation prediction has been raised to 33% from 8.8%.
The biggest contribution to the sharp rise in the 2023 forecast came from forecast deviations and a change in the forecasting approach. Erkan said the exchange rate of the lira, which has declined sharply this year, pushing import prices higher, was also a main factor in the upward revision.
"Until a significant improvement in the inflation outlook is achieved, we will gradually strengthen monetary tightening as and when necessary," said Erkan.