Turkey's new central bank chief vows to maintain tight monetary policy amid inflation concerns

In a change of leadership, Fatih Karahan took the helm as the new governor of Turkey's central bank, replacing Hafize Gaye Erkan.

Karahan, a 42-year-old economist with a University of Pennsylvania economics PhD, emphasised his commitment to a stringent monetary policy aimed at curbing inflation.

"We will be watchful of inflation expectations and pricing behavior. We stand ready to act in case of any deterioration in the inflation outlook," Reuters quoted Karahan as saying.

This move comes on the heels of Erkan's resignation, who cited the need to protect her family amid what she described as a "reputation assassination”.

Karahan, with nearly a decade of experience at the Federal Reserve Bank of New York and a background as an adjunct professor at prestigious institutions such as Columbia University and New York University, brings a wealth of knowledge to his new role.

His previous stint at Amazon as a principal economist in 2022 adds a practical dimension to his academic expertise.

Finance Minister Mehmet Simsek expressed optimism about Karahan's appointment, describing him as an "excellent fit" due to his extensive experience, particularly with the Federal Reserve Bank of New York.

Simsek further highlighted the commitment to support the disinflation process through fiscal discipline and structural reforms.

In his inaugural statement, Governor Karahan emphasised that the primary focus would be on achieving price stability. He expressed confidence in his team's ability to navigate the challenges, stating, "We will continue efforts to ensure disinflation, relying on a strong team."

The central bank's decision to appoint one of its deputy governors, Karahan, to the top position aligns with the Turkish finance ministry's claim that the current central bank strategy enjoys full support from President Tayyip Erdogan.

Goldman Sachs noted in a client memo that the appointment should allay concerns over potential political instability, asserting, "We view the appointment as positive as it should allay any concerns over a near-term loss of political support for the Bank."

(With inputs from Reuters)