CNBC: Turkey’s new central bank governor seen as a ‘credible choice’
fatih karahan
Previously the central bank’s deputy governor, Fatih Karahan’s resume features years spent in prominent American institutions and companies. With Turkey’s inflation at 65%, the 42-year-old economist has his work cut out for him. Investors and economists say continuity in monetary policy priorities will engender confidence in Turkey’s new central bank chief, writes Natasha Turak for CNBC.com, adding yet another voice to many who approve of his appointment.
Turkey’s newly appointed central bank governor, Fatih Karahan, has his work cut out for him, after being named to the job by presidential decree over the weekend following the sudden resignation of his predecessor, Hafize Gaye Erkan.
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Previously the central bank’s deputy governor, Karahan’s resume features years spent in prominent American institutions and companies. He received both a master’s degree and doctorate in economics at the University of Pennsylvania, spent nearly a decade as an economist at the Federal Reserve Bank of New York, worked as a part-time lecturer at Columbia University and New York University, and served as a senior economist at Amazon.
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It is hoped that the 42-year-old economist’s experience will serve him well as he heads the institution working to tackle the eye-watering inflation and cost-of-living crisis that has hit Turkey’s population of 85 million. The country’s currency, the lira, is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years.
Turkey’s consumer price index print came out Monday showing a roughly 65% increase year on year for the month of January. Its central bank has made eight consecutive interest rate hikes since May 2023 — for a cumulative 3,650 basis points — in an effort to rein in soaring inflation. The latest rate increase, on Jan. 25, raised Turkey’s key interest rate by 250 basis points to 45%, though its leaders signaled at the time that the hiking cycle was at its end.
While painful for the country, investors and economists say that the rate hikes have been necessary and that continuity in monetary policy priorities will engender confidence in the new central bank chief.
In his statement posted to the Turkish central bank’s website Sunday, Karahan stressed “price stability” as his team’s main priority, vowing to “ensure disinflation” and “maintain the necessary monetary tightness until inflation falls to levels consistent with our target.”
“All eyes now focus on new central bank governor Fatih Karahan,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a note Monday. “As things stand, continuity in monetary policy looks set to continue.”
Wolfango Piccoli, co-president at advisory firm Teneo, agreed. “Like Erkan, Karahan is not a monetary economist, but is nevertheless regarded as a credible choice,” Piccoli wrote in an analysis for the firm.
“Unlike recent gubernatorial changes, Erkan’s departure will not result in a dramatic shift in policy stance,” he said, adding that the central bank could still “adopt a more hawkish tone in terms of forward guidance to support Karahan in his new role.”
