BOGAZICI – May 2025 | At the Finance Summit 2025 hosted by Bogazici University, Türkiye Central Bank (TCMB) Governor Fatih Karahan reaffirmed the Bank’s commitment to a tight monetary stance to combat persistent inflation pressures. Speaking under the theme “Financial Transformation in the Age of Uncertainty,” Karahan stressed that inflation expectations are still exceeding the Bank’s targeted disinflation path, warranting continued policy firmness.
“Inflation expectations remain above our disinflation trajectory. This outlook makes it necessary to maintain our tight and determined monetary policy stance,” Karahan said during his keynote address titled “Monetary Policy and Inflation Outlook in Türkiye’s Economy.”
Monetary Strategy and Market Stability
Karahan emphasized that the TCMB has taken proactive measures since March to stabilize financial markets and will continue this strategy:
- The transition rate from maturing FX-protected KKM accounts to foreign currency has stayed limited at 14.5%.
- TL deposits currently account for 58% of total deposits, close to historical averages.
- 70% of foreign exchange demand between March 14 and May 2 originated from abroad, while domestic demand remained limited.
“The level of deposit interest rates continues to support TL transitions and savings,” Karahan noted.
Focus on Tools: TL Dominance and Liquidity Control
Karahan outlined the Bank’s key goals moving forward:
- Boost Turkish Lira (TL) deposit share: Measures are being implemented to shift more deposits from KKM into TL.
- Control credit growth: New regulations aim to smooth loan demand fluctuations.
- Manage system liquidity: The CBRT is actively withdrawing excess TL from the banking system to maintain balance.
“We will continue to use liquidity management tools effectively, within market rules and with a proactive approach,” Karahan added.
Disinflation Outlook: Still on Track but with Caution
Karahan noted that consumer price trends indicate some relief in cost-driven pressures. However, food prices remain volatile due to recent agricultural disruptions:
- Annualized inflation, based on median calculations, is slightly above 30%.
- A frost event across Türkiye has raised upward risks for unprocessed food prices, particularly fruit.
- Nonetheless, indicators suggest that the disinflation process will continue.
Cautious Confidence from the Central Bank
While the CBRT remains confident in the disinflationary trajectory, Karahan reiterated the need for vigilance due to lingering uncertainties:
“The tight monetary policy stance will continue until we achieve a lasting decline in inflation and ensure price stability,” he stated.
Karahan concluded by underlining the broader significance of this policy:
“Price stability is a prerequisite for sustainable growth and societal welfare. As the Central Bank of Türkiye, we are determined to reduce inflation in line with our interim targets and support a lasting economic recovery.”
Source: Bloomberght/ Prepared by: İlayda Gök