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Türkiye: Inflation continues to rise, central bank chief resigns in frustration

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Türkiye: Inflation continues to rise, central bank chief resigns in frustration

Hopeful resigns: Hafize Gaye Erkan was head of the Central Bank of Turkey for less than a year. Arif Hudaverdi Yaman/Anadolu via Getty Images

Inflation in Turkey rose again in January to almost 65 percent – despite the renewed increase in key interest rates.

One reason is the sharp increase in minimum wages, which have doubled over the course of a year.

Central bank chief Hafize Gaye Erkan unexpectedly resigned at the weekend. Her successor is a former employee of the US Federal Reserve.

In Turkey the price spiral is turning a little faster. Inflation in Turkey rose slightly in January to an annual rate of almost 65 percent. Experts, on the other hand, had hoped for a small decline. In December alone, prices rose by 6.7 percent in just one month. This was announced by the Turkish statistics office.

Inflation was fueled by the sharp increase in the statutory minimum wage. At the turn of the year, the minimum wage rose by around 50 percent to 17,000 lira, which is around 516 euros per month. Compared to January 2023, the minimum wage was doubled in several steps.

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Turkey has been suffering from extremely high inflation for years. At its peak, inflation in Turkey was over 80 percent. After falling temporarily, inflation has been rising again for some time. President Recep Tayyip Erdoğan had long insisted on lowering interest rates despite rising inflation rates. After his narrow re-election last May, he changed course and appointed Hafize Gaye Erkan, a US-trained banker, as head of the central bank.

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Under Erkan’s leadership, the central bank increased key interest rates in Turkey in several large steps from eight to currently 45 percent. Erkan unexpectedly resigned at the weekend. She was responding to allegations of nepotism.

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But Erdogan is apparently sticking to his new course. Erkan’s previous deputy, Fatih Karahan, will be his successor at the head of the central bank. Karahan, 42, is a former Federal Reserve employee.

The new governor of the Turkish Central Bank, Fatih Karahan. Emin Sansar/Anadolu via Getty Images)

Erkan had headed the central bank since June and was the first woman to hold this position in Turkey. The 44-year-old was recently criticized for allegations of nepotism. The daily newspaper “Sözcü” quoted a central bank employee as saying that Erkan’s father had interfered in personnel decisions. Erkan denied the allegations but resigned anyway. On the platform X, formerly Twitter, she wrote that she wanted to protect her family and her “innocent child”.

After Erkan’s resignation, Finance Minister Mehmet Şimşek also announced that the previous economic policy would be continued.

Despite high inflation and the weak local currency, the lira, Turkey is one of the countries with the highest economic growth in the world. The country benefits from its growing population, large spending programs for reconstruction after the severe earthquake exactly a year ago, but also from its special role after Russia’s attack on Ukraine and its economic proximity to Russia.

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With material from dpa

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