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Turkey’s central bank rocked by another leadership shake-up

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Turkey’s central bank rocked by another leadership shake-up

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Turkish central bank chief Hafize Gaye Erkan has quit just months into her tenure and been replaced by a deputy, the latest leadership shake-up at one of the country’s foremost economic institutions.

Erkan, who was appointed as the central bank’s first female governor in June and has since increased interest rates significantly, said she resigned as the result of a smear campaign against her. But for local and foreign investors, the saga has brought back memories of other late-night putsches against well-regarded central bank leaders.

Who will replace Erkan as central bank chief?

President Recep Tayyip Erdoğan appointed deputy central bank governor Fatih Karahan to replace Erkan late on Friday. He is Erdoğan’s sixth central bank governor since 2019.

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Karahan, who joined the central bank in July, is a well-known figure among the economics community in Turkey. He is widely seen as one of the driving forces behind a big pivot towards more conventional monetary policy that kicked off after Erkan’s appointment.

The University of Pennsylvania-educated economist worked for nearly a decade at the New York Federal Reserve and later joined ecommerce group Amazon before his appointment at the Turkish central bank.

Karahan’s published work and professional experience has broadly focused on macroeconomics and labour markets. His experience contrasts with Erkan, a former Goldman Sachs banker, who specialised in developing complex risk management models for banks.

“I know him as an . . . expert who is respected by the employees of the institution,” Hakan Kara, a former Turkish central bank chief economist, said of Karahan. One local banker added Karahan is a “credible” choice to lead the bank.

What was Erkan’s role in Turkey’s economic overhaul?

Erdoğan, Turkey’s leader of the past two decades, abruptly changed course on economic policy after his re-election in May. He abandoned unconventional policies that had fuelled a prolonged inflation crisis and by spring 2023 ignited serious concerns that Turkey was headed for a balance of payments crisis or capital controls.

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The president appointed Mehmet Şimşek as finance minister, a former Merrill Lynch bond strategist who had served years earlier as deputy prime minister, in June to lead the economic turnaround. Erkan’s appointment days later helped bolster expectations that Erdoğan was serious about the overhaul.

The central bank under Erkan’s leadership has boosted interest rates from 8.5 per cent to 45 per cent. It has also taken a series of other steps aimed at cooling rampant inflation and financing growth, while encouraging locals to hold liras rather than stashing their savings in dollars and gold.

The bank’s foreign currency war chest, which was depleted in recent years in an unsuccessful attempt to prop up the lira, was also rebuilt during Erkan’s tenure. Gross foreign currency reserves were $85bn at the end of 2023, up from $48bn in May, according to central bank data.

What does this mean for investors?

Foreign investors have been slowly warming to Turkish assets in recent months after largely abandoning the country’s markets over the past decade because of Erdoğan’s unorthodox policies.

Pimco, one of the world’s biggest bond managers, told the Financial Times last month it had started buying lira-denominated debt and that Turkey could even regain its investment-grade credit ratings in the next five years.

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One of investors’ most persistent fears, however, has been the risk of another “Ağbal incident”, a reference to 2021 when Erdoğan sacked well-respected central bank governor Naci Ağbal for raising interest rates.

The initial reaction from local and foreign analysts is that Erkan’s exit is not a repeat of Ağbal’s dismissal.

A senior economic official said that Şimşek was provided the latitude to nominate a governor who shared his convictions on the restoration of conventional economic policies.

“Our president has full support and confidence in our economic team and the programme we are implementing,” Şimşek said on Friday.

Fatih Akcelik, Turkey economist at JPMorgan, told clients, “while sudden leadership changes bring discomfort for investors, we see the new [central bank] governor as positive for disinflation and lira”.

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He added that Karahan would probably be more hawkish on interest rates than Erkan had been since he was part of a trio of central bank deputy governors who were thought to have agitated strongly for large rate rises.

Akcelik added that a “dovish tilt” at last week’s central bank meeting, in which the policy-setting committee signalled it was unlikely to raise rates again, will probably be reversed.

What prompted Erkan’s exit?

Rumours have been swirling around Turkey’s economics community for the past several weeks after a former employee claimed in a local news report that Erkan’s father held an unofficial role at the central bank and had sacked her.

Politicians in Turkey’s opposition political parties latched on to the drama, with one MP demanding in January that Şimşek answer questions related to the allegations.

Erkan dismissed the claims as “unfounded” and “completely unacceptable”.

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Erdoğan appeared to back Erkan as recently as last week, when he said unnamed assailants were “conducting campaigns to disrupt the climate of confidence and stability that we have achieved with great difficulty in the economy with unreasonable rumours”.

Erkan said she had quit for personal reasons: “A major character assassination campaign has been organised against me recently,” Erkan said, adding that she had stepped down “to prevent my family and, moreover, my sinless child . . . from being further affected by this process”.

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Supreme Court reinstates Republican-favored Alabama congressional districts

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Supreme Court reinstates Republican-favored Alabama congressional districts

The U.S. Supreme Court

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Tasos Katopodis/Getty Images

The Supreme Court on Tuesday cleared the way for Alabama to use a congressional district map favored by Republicans.

The court, in an unsigned order, overturned a three-judge district court panel that found that the map is “tainted by intentional race-based discrimination.” The court’s three liberals publicly dissented.

The ruling means that Alabama’s 2026 midterm elections will feature six Republican-leaning districts and one Democratic-leaning one, as opposed to a map with only five safe Republican seats. Democrat Shomari Figures, who represents Alabama’s Second District, will likely lose his seat as a result of the high court’s ruling.

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The story of Alabama’s congressional map is long and tortured. It began in 2021, when the state implemented a new map to account for population changes in the census. The map featured only one majority-black district out of seven, even though the state is more than one-quarter Black.

Voters immediately sued, claiming the map illegally diluted minority votes in violation of the Voting Rights Act and the Constitution. Lower court judges agreed, ruling that the state must draw a map with two districts where Black voters have a realistic chance of electing their candidate of choice. The Supreme Court more than once has ordered Alabama to draw a compliant map.

But the state has refused and instead continued to litigate the case. On Tuesday, that tactic paid off.

What changed? In April, the Supreme Court’s conservative supermajority all but gutted what remains of the Voting Rights Act, ruling that states cannot purposefully draw districts that are majority-minority.

Alabama then asked the high court to reinstate the state’s old map, under the theory that this new ruling meant that it was permissible to use a map with only one majority-Black district. In an unsigned, unexplained order in May, the high court essentially reversed its previous opinions, and allowed Alabama to use the old map for the upcoming midterm elections.

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This set off a flurry of activity in Alabama. By the time the Supreme Court issued its May order, absentee balloting had already begun, using the court-drawn map. So Republican Governor Kay Ivey cancelled elections and scheduled a special primary for August for the affected congressional races.

The case, however, was not over.

In its ruling, the Supreme Court had ordered a lower court panel to continue evaluating Alabama’s map in light of its recent Voting Rights Act decision. And just 15 days after that order, the panel, composed of three Republican judges—two of them Trump appointees—concluded unanimously that even under the Supreme Court’s new standards, the plan for a single black district was “intentionally discriminatory.”

So, once again, Alabama returned to the Supreme Court, arguing that the map was partisan, not racially discriminatory. In short, that the Republican legislature simply drew the map to elect more Republicans. And that under the Supreme Court’s new interpretation of the Voting Rights Act, the GOP map should be allowed to stand.

The court’s conservative agreed, writing that the lower court “did not heed the presumption of legislative good faith.”

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The court’s three liberals publicly dissented, castigating the conservative majority for failing to abide by its 2006 decision in the case of Purcell v. Gonzalez. That decision declared that courts should not change election rules too close to an election.

Justice Sonia Sotomayor, in her dissent, said the court “debases the democratic process” and “corrodes the rule of law by rewarding Alabama’s gamesmanship and outright defiance of court orders.”

Tuesday’s decision is the latest in a series of Supreme Court rulings that could well reshape the 2026 midterm elections, making it much harder for Democrats to prevail.

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Map: 3.7-Magnitude Earthquake Shakes the San Francisco Bay Area

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Map: 3.7-Magnitude Earthquake Shakes the San Francisco Bay Area

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Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

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A minor, 3.7-magnitude earthquake struck in the San Francisco Bay Area on Tuesday, according to the United States Geological Survey.

The temblor happened at 9:44 a.m. Pacific time about 4 miles southeast of Cloverdale, Calif., data from the agency shows.

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U.S.G.S. data earlier reported that the magnitude was 3.6.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

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Aftershocks detected

Subsequent quakes have been reported in the same area. Such temblors are typically aftershocks caused by minor adjustments along the portion of a fault that slipped at the time of the initial earthquake.

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Quakes and aftershocks within 100 miles

Aftershocks can occur days, weeks or even years after the first earthquake. These events can be of equal or larger magnitude to the initial earthquake, and they can continue to affect already damaged locations.

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When quakes and aftershocks occurred

 All times are Pacific time. The New York Times

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Sources: United States Geological Survey (epicenter, aftershocks, shake intensity); LandScan via Oak Ridge National Laboratory (population density) | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Tuesday, June 2 at 12:59 p.m. Eastern. Aftershocks data is as of Tuesday, June 2 at 1:59 p.m. Eastern.

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Promoting Advanced Artificial Intelligence Innovation and Security

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Promoting Advanced Artificial Intelligence Innovation and Security

By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered:

Section 1.  Purpose.  The United States continues to lead the world in Artificial Intelligence (AI) because of the enormous talent and innovation of our AI industry, and because we refuse to stifle this innovation with overly burdensome regulation.  My Administration has unleashed tremendous technological growth and economic investment in AI by slashing the bureaucratic constraints that the prior administration placed on America’s AI developers and researchers, and by instead encouraging AI innovation and accelerating responsible AI adoption across government and industry. 

Advanced AI capabilities make our Nation stronger, but also introduce new national security considerations that require coordinated action across executive departments and agencies (agencies), and components.  As these capabilities evolve, my Administration will continue to work closely with industry to ensure that the best and most secure technology is deployed rapidly to confront any and all threats to our country.  We will continue to lead an America First cybersecurity effort that enhances both our national security and our global AI dominance.

It is the policy of the United States to promote AI innovation and security by working collaboratively with the private sector to modernize government and private sector information systems and harden them against external threats; to protect American ingenuity and intellectual property from exploitation and theft by adversaries; and to cultivate America’s advanced AI-enabled capabilities.

Sec. 2.  Upgrading American Systems for Advanced AI.  (a)  Within 30 days of the date of this order, the Committee on National Security Systems shall prioritize the cyber defense of National Security Systems, as defined in 44 U.S.C. 3552(b)(6)(A), by taking appropriate and expeditious action consistent with the purpose of this order.

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(b)  Within 30 days of the date of this order, the Secretary of War shall prioritize the cyber defense of Department of War information systems by taking appropriate and expeditious action consistent with the purpose of this order.

(c)  Within 30 days of the date of this order, the Secretary of Homeland Security, through the Director of the Cybersecurity and Infrastructure Security Agency (CISA), in consultation with the Director of the Office of Management and Budget (OMB), the Assistant to the President for National Security Affairs, and the National Cyber Director, shall release Binding Operational Directives and other guidance as appropriate to:

(i)    expedite and prioritize the cyber defense of civilian Federal Government information systems in order to protect our Nation’s vital functions;

(ii)   establish or expand Federal programs and cybersecurity services that enhance AI-enabled defensive tools; and

(iii)  facilitate access to cybersecurity tools and services including, where appropriate, covered frontier models for agencies, State and local authorities, and operators of critical infrastructure such as rural hospitals, community banks, and local utilities.

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(d)  Within 30 days of the date of this order, the Secretary of the Treasury, in consultation with the National Cyber Director, the Secretary of War, through the Director of the National Security Agency (NSA), and the Secretary of Homeland Security, through the Director of CISA, shall form an AI cybersecurity clearinghouse, in voluntary collaboration with the AI industry and operators of critical infrastructure, that coordinates and deconflicts scanning for software vulnerabilities, discovers and validates such vulnerabilities, and coordinates and prioritizes remediation and distribution of vulnerability patches.

(e)  Within 30 days of the date of this order, the Director of OMB, in coordination with the National Cyber Director and the Director of CISA, shall determine whether any Federal grant programs have available and relevant funding that can be directed toward applicants developing advanced AI vulnerability detection.

(f)  Within 60 days of the date of this order, the Director of the Office of Personnel Management shall expand the United States Tech Force Information Cybersecurity Specialist hiring and placement pathways.

Sec. 3.  Secure Frontier Model Deployment.  Within 60 days of the date of this order, the Secretary of the Treasury, the Secretary of War, through the Director of NSA, and the Secretary of Homeland Security, through the Director of CISA, in consultation with the White House Chief of Staff, through the National Cyber Director, the Assistant to the President for Science and Technology (APST), and the Secretary of Commerce, through the Director of the National Institute of Standards and Technology, and in coordination with other agencies, as appropriate, shall:

(a)  develop and maintain a classified benchmarking process to assess the advanced cyber capabilities of AI models and determine the threshold at which an AI model should be designated a “covered frontier model” for the purposes of this order, sharing such assessments with AI developers and researchers as appropriate.  Such a determination shall be made by the Director of NSA, in consultation with the National Cyber Director, the APST, the Director of CISA, and other representatives of the Department of War, as appropriate.

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(b)  design a voluntary framework with AI developers through which developers would be able to:

(i)    engage the Federal Government to determine whether model(s) under development meet the designation of “covered frontier model”;

(ii)   provide the Federal Government with access to covered frontier models, subject to appropriate confidentiality, cybersecurity, insider-risk, and intellectual-property protection, use, and nondisclosure requirements, for a period of up to 30 days before they plan to release such models to other trusted partners; and 

(iii)  collaborate with the Federal Government to select trusted partners that will have early access to covered frontier models to promote secure innovation and strengthen the cybersecurity of critical infrastructure.

(c)  Nothing in this section shall be construed to authorize the creation of a mandatory governmental licensing, preclearance, or permitting requirement for the development, publication, release, or distribution of new AI models, including frontier models.

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Sec. 4.  Protection Against Criminal Actors.  The Attorney General shall prioritize the enforcement of 18 U.S.C. 1028, 18 U.S.C. 1030, 18 U.S.C. 1343, and all other applicable Federal criminal laws against anyone who utilizes AI to illegally access or damage a computer without authorization, or who utilizes AI while engaged in such illegal access to further any other crime.  This includes breaching any public or private information technology system, or employing AI agents to unlawfully access data or information that is subsequently used for a criminal or unlawful purpose.

Sec. 5.  General Provisions.  (a)  Nothing in this order shall be construed to impair or otherwise affect:

(i)   the authority granted by law to an executive department or agency, or the head thereof; or

(ii)  the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b)  This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

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(c)  This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

(d)  The costs for publication of this order shall be borne by the Department of War.

                             DONALD J. TRUMP

THE WHITE HOUSE,

    June 2, 2026.

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