JP Morgan:   CBRT likely more  hawkish under new leadership

President Erdogan appointed hawkish Deputy Governor Fatih Karahan as  CBRT Governor, replacing Hafize Gaye Erkan. Following family allegations  against Hafize Gaye Erkan two weeks ago, Hafize Gaye Erkan decided to resign  on 2nd Feb. President Erdogan appointed hawkish Deputy Governor and former  Fed economist Dr. Fatih Karahan as a new Governor. Three deputy governors  namely Dr. Fatih Karahan, Dr. Cevdet Akcay, and Dr. Hatice Karahan were  instrumental in delivering rate hikes amounting to 36.5%-pts, the simplification of  macroprudential regulations, and boosting CBRT`s FX reserves. It is worth  emphasizing that the CBRT accelerated rate hikes with an outsized 750bp hike  following the appointment of the three deputy governors in August 2023.


While sudden leadership changes bring discomfort for investors, we see the  new CBRT Governor as positive for disinflation and lira. We think that the  reshaped MPC is likely more hawkish. The stance of two MPC members – Dr. Elif Haykir Hobikoglu and Dr. Fatma Ozkul- is not known but the Governor and two hawkish deputy governors will likely drive MPC decisions with increased focus on disinflation, in our view. It is now likely that the dovish tilt in its last MPC statement will be reversed. We expect that CBRT Governor Fatih Karahan will deliver  hawkish forward guidance in CBRT`s Inflation Report Press Briefing next  Thursday, if not earlier.


Central Bank Governor Erkan “sacked” new appointed Governor is Fatih Karahan

We expect high rates for longer along with tighter macroprudential measures as monetary policy is likely to be more sensitive to the inflation outlook going  forward. We now see a rate hike by the CBRT as more likely than a rate cut.

However, we don’t yet believe that a rate hike will actually be delivered and keep the peak policy rate at 45% – recognizing upside risks to it.

Another positive is that Governor Fatih Karahan is likely to bring more coordination between monetary and fiscal policies to fight inflation. Treasury and Finance Minister Mehmet Simsek stated that new Governor Fatih Karahan is appointed with his support. Vice President Cevdet Yilmaz also endorsed the new CBRT Governor Fatih Karahan. We believe that the coordination between fiscal and monetary policies is crucial to see disinflation in 2H24 by limiting tax hikes as well as wage hikes along with administered energy price hikes.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.