Turkish President, Recep Tayyip Erdoganmade the decision by decree this Friday to designate a prominent economist as the new governor of central bank. Your main task will fight high inflation and the devaluation of the lyre.
Hafize Gaye Erkanwho boasts a successful career in First Republic Bank and Goldman Sachsassumes the great challenge of directing the Turkish economy and advocates to increase interest rates as a measure to combat inflation. Likewise, this historic appointment also marks a hito, since she is the first woman to lead the central bank of Turkey.
President Erdoğan, who was re-elected for a third mandate on May 28, had already appointed a new finance minister last week, Mehmet Simsek, a former Merrill Lynch banker, who also advocates a return to financial orthodoxy. This occurs at a time when the Inflation in the country exceeds 40%. yoy
Contrary to conventional economic theory, which recommends raising interest rates to cool the economy and contain inflation, Erdogan has forced the Turkish central bank to cut its rates, further fueling price increases.
The president’s heterodox economic policy is contributing to the depreciation of the Turkish lirawhich has lost approximately 80% of its value against the dollar in the last five years.
Meanwhile, the Turkish central bank is scheduled to announce its new interest rates on June 22.
Türkiye’s inflation and currency depreciation
Inflation in Türkiye seems slow down after the election of Erdogan, but independent economists dispute the figures. After the elections that consolidated the Erdogan government, the price rise in the Ottoman country fell below 40% in Maymarking the first time in 16 months, thanks to a temporary free gas supply measure.
However, these official data, the first since the president’s re-election, are questioned by independent economists from the Inflation Research Group (ENAG).
According to these experts, annual inflation is between 105% and 109%whether the free gas supply is taken into account or not. Erdogan, in his third term, has vowed to fight inflation as his top priority.
Previously, inflation in Turkey was over 85% and started to slow down from November. This change is also due to an election promise by Erdogan, who announced the free gas supply in May for homeswho will continue to benefit from 25 m³ of free gas per month until May 2024.
Source: Ambito
