Recep Tayyip Erdogan has a new central bank chief.

If nothing else, Hafize Gaye Erkan knows when to quit, an underrated quality that Erdogan lacks when it comes to doubling down on perilous policies. Erkan was a top executive at First Republic. She left a year and half before the bank was forced into the arms of Jamie Dimon.

Erkan replaced the deliberately hapless Sahap Kavcioglu as part of Erdogan’s efforts to restore market confidence following last month’s election victory. So far, things aren’t going well. The lira suffered its worst single-session decline since December 2021 this week, when Mehmet Simsek briefly attempted to roll back the FX intervention regime which bled Turkey’s reserves under Kavcioglu.

Simsek is reprising his role as Turkey’s top economic czar. He was famously replaced by Erdogan’s son-in-law in 2018, after the last election. As discussed here in the linked article above, the odds are stacked against Simsek and Erkan. They’re not really in charge of anything. Because Erdogan is in charge of everything.

The lira fell 11% this week alone, and is down some 23% in 2023.

We’ve seen this movie time and time again. Erdogan nods in the direction of appeasing foreign capital, it’s never sincere, something irritates him and he goes right back to railing against “the interest rate lobby” (a nefarious cabal that exists mostly, or even solely, in his mind) and a hodgepodge of foreign conspirators running the gamut from banks to coup plotters.

Kavcioglu was loyal to Erdogan and faithful to his namesake economic policies. He (Kavcioglu) was put in charge of Turkey’s banking regulator, not an insignificant post traditionally.

Real rates in Turkey are among the most negative in the world. The situation illustrated by the red-shaded area in the chart is absurd — abject farce.

I’m not sure what Erdogan’s rationale was for choosing Erkan. She’s hardly a household name, despite a long stint at Goldman. She did suggest in March that the Fed was chancing a recession in the US with additional rate hikes amid the still-simmering banking turmoil that eventually engulfed her former colleagues at First Republic.

“I expect a recession in America mid- or late this year as a possible result of the Fed’s aggressive monetary tightening,” she wrote, in a somewhat incoherent opinion piece for Dunya, a Turkish daily. Erkan appeared to blame the Fed for inflating “bubbles,” but then seemed to suggest that rather than burst them and risk recession, it’d be preferable to keep policy accommodative. “Maybe Japan knows better,” she wrote. “They just stayed in the low interest period for years.”

CBT meets on June 22. Analysts, bless their hearts, expect a massive rate hike.