Ankara: Fatih Karahan, governor of the Central Bank of the Republic of Trkiye (CBRT), announced that the bank will persist with a tight monetary policy stance until there is a permanent decrease in inflation and stabilization of prices. Karahan made these remarks at the German-Turkish Chamber of Commerce and Industry (AHK) Economy meeting, where he highlighted the positive impact of economic and trade relations between Germany and Trkiye on mutual prosperity and growth.
According to Anadolu Agency, Karahan addressed recent market developments that led to value losses in financial assets, stating that the bank took swift action to ensure that market volatility remained temporary and its effects on the economy short-lived. He emphasized the CBRT's proactive measures, adhering to market rules, to maintain stable market functioning and open communication channels.
Karahan explained that the CBRT is steadfast in its commitment to a tight monetary policy to ensure price stability, using its extensive toolkit effectively. He detailed the economic recovery in late 2024, driven by strong household demand and increased private consumption, alongside a positive contribution from net exports. Despite previous declines, industrial production and the Services Production Index showed recovery in the last quarter of 2024, with the latter driven by sectors less dependent on consumer demand.
Karahan assured that demand conditions would not disrupt the disinflation process, as indicators show a more balanced domestic demand and improved current account deficit figures. He acknowledged potential risks to the current account balance in 2025, including uncertainties in global trade, but remained optimistic about maintaining a favorable deficit-to-GDP ratio.
Exports showed resilience despite weak foreign demand, with Trkiye's export share increasing in the face of the EU's declining imports. Karahan noted the continuing disinflation process, with consumer inflation dropping significantly since its peak in May 2024. He highlighted the importance of monitoring underlying trends to assess inflation accurately.
Karahan addressed market volatility, noting increases in exchange rates and risk premiums, but reassured that the bank took measures to support a tight monetary stance. The CBRT adjusted interest rates and liquidity measures to stabilize the market, including increasing the overnight lending rate and suspending one-week repo auctions.
In addition, the CBRT introduced TL-settled forward foreign exchange sales to mitigate exchange rate risks and enhance market efficiency. Karahan reiterated the bank's commitment to using all monetary policy tools decisively to maintain financial market stability, promising to maintain a tight monetary policy until inflation and price stability are achieved. He stressed that any significant and permanent inflation deterioration would lead to further tightening of monetary policy.