Turkey's central bank governor resigns

Shafaq News/ Hafize Gaye Erkan has resigned from his position as the governor of Turkey's central bank in the latest twist in the long soap opera surrounding the country's deteriorating financial position.

Erkan, the first woman ever to run the central bank, was appointed last June, with a mandate to bring the central bank back toward orthodox economic and financial principles — after years of political meddling and unorthodox policy under Turkish President Recep Tayyip Erdoğan.

Under Turkey's strongman leader — who has been in power since 2003 — the central bank had repeatedly cut interest rates, even as inflation soared to 85% in 2022.

The standard economic approach to reining in inflation would call for higher, not lower interest rates.

The appointment of Erkan as the head of the central bank — after Erdoğan's re-election in May 2023 — marked a sharp swing back toward orthodox economics at the central bank.

During her tenure of less than a year, the central bank raised interest rates by 36.5 percentage points to their current level of 45%.

In announcing her departure, she cited a "character assassination" campaign against her in the wake of a national newspaper's reports last month that her family exerted undue influence at the central bank.

Officials within the government say that the change in the central bank's leadership is a personal matter and doesn't mean the government is altering its approach toward running a more orthodox monetary policy.

They have already named Fatih Karahan, a former economist at the Federal Reserve Bank of New York, to the top position, which seemed to ease the concern of markets.

Turkey's currency, the lira, strengthened slightly on Monday.

The bottom line: Still, Turkey's shambolic approach to financial management has already cost the country dearly.

The lira has lost nearly 95% of its value against the U.S. dollar over the last 16 years and almost 56% in the last two years alone.