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Erdogan taps ex-NY Fed official as Turkey's deputy Central Bank head

In a major reshuffle, the Turkish president has dismissed all three deputy Central Bank governors as his government ramps up efforts to regain the confidence of Western investors.
The front page of the Hurriet Daily news displays a headline of yesterdays interest rate hike at a news stand on June 23, 2023 in Istanbul, Turkey. The Turkish Lira weakened to a record low of 25.74 against the dollar, a day after the central bank hiked interest rates from 8.5 percent to 15 percent in the first rate decision since the appointment of new central bank governor Hafize Gaye Erkan and the re-election of President Recep Tayyip Erdogan last month. (Photo by Chris McGrath/Getty Images)

ANKARA — Turkish President Recep Tayyip Erdogan tapped on Friday Fatih Karahan, a former official  of Federal Reserve Bank of New York, as one of three new deputy Central Bank governors.

The news comes as the Turkish government scrambles to gain the trust of foreign investors

Fatih Karahan, who  got his PhD in economics from the University of Pennsylvania, served as an economic research advisor at New York Fed, according to his bio at the Bank’s website. Before joining the New York Fed, he also worked at Amazon as a principal economist, his Linkedin profile shows.

As part of the government’s major U-turn from unorthodox economic policies to conventional ones, Erdogan replaced all three deputy Central Bank governors. Mustafa Duman, Emrah Sener and Taha Cakmak were replaced by Hatice Karahan,  Cevdet Akcay and Fatih Karahan. 

US-educated (Syracuse University) Hatice Karahan, Erdogan’s former economic adviser, became the first woman in the role. The bank’s first woman governor, Gaye Erkan, was appointed in June.

The reshuffle came a day after Erkan held her first press conference since assuming office. In her statements Thursday, she raised the country's year-end annual inflation forecast from 22.3% to 58%.

The appointments come as the government is ramping up its efforts to draw foreign funds and investors to Turkey to ease the country’s acute foreign currency crunch.

In addition to Gulf countries with which Turkey’s financial cooperation is rapidly deepening, the Turkish government is also courting Western investors to regain their confidence abandoning its years of unorthodox policies.

Speaking in Salzburg, Austria, Thursday, Turkey’s Economy and Finance Minister Mehmet Simsek reiterated his government’s bid to revive its EU membership process. 

“[The European Union needs] Turkey as much as Turkey needs Europe's transformative power. The EU and Turkey share common global values. That’s why Turkey wants to be in close ties with the EU,” Simsek said.  

After his reelection in May, Erdogan appointed mainstream economists Simsek and Erkan to the country's economy management in a departure from his prior unconventional wisdom that higher interest rates cause higher inflation. 

Following Erkan’s appointment, the Central Bank raised its interest rates by 900 basis points in successive hikes in June and July from 8.5% to 17.5%.

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