Turkish Central Bank reshuffle spurs optimism for economic landscape

A significant reshuffle among the highest ranks of the Turkish Central Bank which brought in three new deputy governors holds the potential to bolster the bank's autonomy and decision-making capabilities according to experts, instilling optimism in the economic landscape of the nation.

A day after the bank vowed to continue gradual monetary tightening and raised its end-2023 inflation forecast, Turkish President Tayyip Erdogan named three deputy governors, Osman Cevdet Akcay, Fatih Karahan and Hatice Karahan, the country's official gazette said on Friday.

Fatih Karahan, who held economist positions in the Federal Reserve Bank of New York for almost a decade, most recently worked for Amazon as a principal economist.

Akcay is an economist who used to work at Turkish lender Yapi Kredi and Hatice Karahan is an academic and a chief economic adviser to the president.

Tim Ash, a strategist at BlueBay Asset Management, said the appointment of the three represented a "180 degree turn" by Erdogan as they replaced less orthodox thinkers, Reuters reported.

"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.

The nominations were met with approval by Turkish economists and financial experts as well.

Murat Muratoglu, otherwise a harsh critic in Turkey’s Sozcu Newspaper, commended the appointments for being merit-based and highly successful. According to Muratoglu, “the Central Bank gained more independence in decision-making.” However, amidst the positive outlook, Muratoğlu also raised a cautious question, wondering if there might be a hidden trap in these strategic moves.

Financial Markets Executive Iris Cibre also appreciated the appointments “that demonstrated an acknowledgment of existing challenges.” Cibre expressed hope that the new team would be granted the freedom to accelerate actions without the need for permissions, although she preferred a more independent approach.

Selva Demiralp, a professor in Koc University, lauded the removal of the team responsible for approving decisions that led to an economic downturn after September 2021. She welcomed the introduction of reputable figures as their replacements and expressed hope that the new team would have the necessary policy space to swiftly steer the economy back to the conditions of September 2021.