by Burak Akinci
ANKARA, Feb. 3 (Xinhua) -- The reshuffle of the head of the Turkish central bank is not expected to lead to a change in orthodox economic policies carried out in Türkiye since last year to fight stubbornly high inflation, experts said.
Hafize Gaye Erkan, 44, a former Wall Street executive and the first woman to lead the bank, announced her resignation on Friday evening, slamming nepotism accusations against her and her family as "character assassination."
She came under criticism on social media for allegedly allowing her father to make decisions regarding central bank personnel.
Turkish Treasury and Finance Minister Mehmet Simsek described Erkan's decision as "personal" while she was replaced by her deputy Fatih Karahan, 42, a decision in the official gazette said early on Saturday.
Karahan has become the sixth central bank governor since 2019.
During Erkan's eight-month tenure, the central bank aggressively hiked interest rates from 8.5 percent to 45 percent since June 2023 to tame double-digit inflation as part of a policy pivot towards monetary tightening.
Türkiye's annual inflation, which topped 85.5 percent in October 2022, gradually dropped to around 60 percent under the country's new economic management led by Simsek and Erkan, appointed by President Recep Tayyip Erdogan after his election victory in May 2023.
In January, the central bank announced the completion of the tightening cycle and would maintain current levels "as long as needed" to bring about the desired disinflation.
Simsek said in a statement on Friday evening that the program implemented since last summer, which has won foreign investors and commentators' confidence, "continues without interruption and with determination."
According to analysts, the resignation of Erkan is not expected to lead to a change of course in monetary orthodoxy implemented to battle runaway inflation that has fueled a cost-of-living crisis in Türkiye.
"This decision seems to be taken on personal reasons and not because of policymaking differences," Arda Tunca, an independent economist and columnist, told Xinhua, saying that he thinks "the trajectory of the Turkish economy is to stay on the same path as before."
In Tunca's view, the shake-up is positive for the credibility of the bank.
Timothy Ash, London strategist at RBC BlueBay Asset Management, said on the social media platform X that "Crisis over -- the departure of Erkan has nothing to do with policy -- just personal."
Erkan's departure is the latest turbulence in Türkiye's economy which is facing severe woes in recent years marked by runaway inflation and a weakening currency that has hit households hard.
Annual inflation stands at 64.8 percent in January but is expected to rise until mid-2024 before dropping to 36 percent in the year-end, according to official figures.
Some economic observers have questioned Erdogan's determination to hold on to high interest rates ahead of local elections planned for the end of March.
The Turkish leader has focused on reconquering major cities Istanbul and Ankara's lost to the opposition in 2019. In a bid to woo voters, significant hikes in pensions and the minimum wage were announced in early January.
A public spending spree may harm the ongoing disinflation process and exacerbate the country's economic troubles, experts warned.
Millions of Turks cannot make ends meet amid soaring cost of living and prices are expected to rise further. ■
