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Turkish central bank governor Fatih Karahan reaffirmed the commitment to maintaining a tight monetary policy until price stability is achieved, stating that the stance will strengthen the disinflation process through demand, exchange rate and expectation channels, during remarks at Bank of America's Türkiye Macro Conference 2025 on Friday.
Karahan emphasized that recent updates to gross domestic product (GDP) figures have led to significant changes in economic assessments. He noted that various indicators point to slowing economic activity, with private consumption growth falling below GDP growth rates.
"High-frequency data shows that demand rebalancing continues," Karahan stated, highlighting the ongoing adjustment in the Turkish economy.
While acknowledging that the disinflation process continues, Karahan warned that upward risks remain active in the economy.
"Demand for the Turkish lira is strong. Macroprudential measures and strong reserves support reverse dollarization," Karahan assessed.
The governor reiterated the central bank's commitment: "Until price stability is achieved, the tight monetary policy stance will strengthen the disinflation process through demand, exchange rate and expectation channels."
Karahan emphasized that the macroeconomic framework outlined in the Medium-Term Program will contribute to the disinflation process.
"The Board will determine steps regarding the policy rate by considering inflation realizations, its underlying trend and expectations, ensuring the tightness required for disinflation in line with interim targets," Karahan stated.
He added that the size of policy steps will be reviewed with an inflation outlook-focused, meeting-based and cautious approach.
The governor warned that if the inflation outlook diverges significantly from interim targets, the monetary policy stance will be tightened.
Finance and Treasury Minister Mehmet Simsek, evaluating July's balance of payments data released by the Central Bank of the Republic of Türkiye (CBRT), projected improved external balances for the coming period.
Simsek noted on his social media account that the current account posted a $1.8 billion surplus in July, with the annual current account deficit declining to $18.8 billion. He emphasized that the external financing outlook continues its positive trajectory.
The finance and treasury minister highlighted that in the first seven months of the year, external debt rollover rates for the real sector and banks reached 163% and 227% respectively.
"We expect the annual current balance to improve in the third quarter, supported by the narrowing foreign trade deficit and increasing tourism revenues," Simsek stated.
Looking ahead to 2025, Simsek provided specific targets for external balance sustainability.
"We forecast the current account deficit to GDP ratio to remain at sustainable levels of 1.4% in 2025," Simsek said.
The minister emphasized ongoing efforts to consolidate gains: "In line with the roadmap we have laid out with our program, we are working to make the gains in the current account permanent and further improve external financing quality."
Simsek concluded by outlining the government's broader economic strategy.
"Through our comprehensive structural reform steps, we will increase our global competitiveness by ensuring productivity growth and technology-focused transformation," he stated.
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