Baku:Bangkok Turkish residents continue to show a strong preference for lira-denominated assets, despite ongoing fund outflows, according to Central Bank Governor Fatih Karahan.

According to Anadolu Agency, Karahan addressed the International Monetary Fund and World Bank annual meetings, emphasizing that proactive measures have limited potential spillovers from funds with trading restrictions. He also noted that a tight monetary policy supports the demand for the Turkish lira.

Karahan assured that the Central Bank would maintain its tight policy stance until price stability is achieved, focusing on disinflation through various channels, including demand and exchange rates. Interest rate decisions will be cautious and made on a meeting-by-meeting basis, with potential for further tightening if inflation projections deviate from the bank's targets.

Despite facing supply-side pressures, particularly from energy prices, underlying inflation is showing signs of moderation thanks to weaker demand. Consumer inflation has decreased to 29.7% in September from 75.5% in May 2024, with monthly underlying inflation easing slightly.

Seasonally adjusted services inflation has reached its lowest in five years, and rent inflation is also easing. However, increases in transportation and communication prices partially offset these benefits. Karahan highlighted that inflation expectations require continued caution, even as macroprudential policies support slower credit growth.

While external demand prospects for 2026 appear weaker, the trade deficit remains moderate, aided by stable tourism revenues. Additionally, Turkey's sliding-scale fuel tax mechanism has helped restrain fuel price increases. Gold price fluctuations, however, have added to volatility in reserve buffers.