Türkiye overhauls central bank management with 3 new deputy governors

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 late Thursday.

Osman Cevdet Akçay, Fatih Karahan and Hatice Karahan have been appointed as deputy Central Bank of the Republic of Türkiye (CBRT) governors, Daily Sabah reports citing the decision published in the Official Gazette.

The removed deputies included Emrah Şener, Taha Çakmak, and Mustafa Duman, the decision said.

The move marked the latest major reshuffle since President Recep Tayyip Erdoğan was reelected in late May.

Days after he extended his rule into the third decade, Erdoğan 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.

The central bank has raised its one-week repo rate by 9 percentage points to 17.5% at the first two monetary policy meetings under Erkan, who is leading a reversal from an easing drive that saw the bank 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.

Unveiling the second quarterly inflation report of the year in her first news conference, Erkan said on Thursday 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.