The Turkish lira “welcomed” the new head of the Central Bank of Turkey, and it seems that the markets do not yet believe in his ability to radically tighten the monetary policy. And without that credit of trust, inflation and devaluation cannot be stopped.

The Turkish lira sank to new record lows after Turkey’s central bank raised the country’s benchmark interest rate by 650 basis points, almost doubling it, from 8.5% to 15%, in a dramatic monetary policy reversal. That also marked the country’s first hike since March 2021.

The problem is that a strong tightening of the monetary policy will inevitably lead to a severe recession, so the decision of the right balance will be very uneasy, especially eyeing ordeals of Turkey’s former central bank head Sahap Kavcioglu. P.S. The example of Turkey is very instructive. It clearly shows what happens with a weak budget and a soft monetary policy.

On June 9th, Hafize Gaye Erkan was named governor of the Central Bank of Turkey, who is expected to play a key role in efforts to boost the country’s crisis-hit economy. Erkan becomes the first woman to head the institution after being appointed by Turkish President Recep Tayyip Erdogan. Erkan joined the global investment bank Goldman Sachs as an associate in 2005, and by 2011, she had been named managing director. She also served in First Republic Bank in 2014, where she became co-chief executive officer in 2021.