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The Central Bank of Türkiye (CBRT) raised its year-end inflation forecasts for 2024 and 2025, while maintaining a firm stance on monetary policy despite upward revisions. Governor Fatih Karahan emphasized the commitment to fighting inflation, projecting significant improvement by 2026.
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The Central Bank of Türkiye has updated its year-end inflation estimates for 2024 and 2025 to 44% and 21%, respectively, according to Governor Fatih Karahan.
Speaking at the presentation of the 4th Inflation Report, Karahan predicted that inflation would fall to 12% by the end of 2026.
Karahan emphasized the continued implementation of strict monetary policies, aimed at stabilizing the Turkish lira and curbing inflation. He noted that the bank has kept the policy interest rate unchanged since March, when it was raised to 50%.
This decision aligns with the bank's strategy to maintain a tight policy stance until a lasting decline in inflation is observed. Karahan mentioned, "We expect a sustained decline in inflation as domestic demand balances, and the lira strengthens."
The updated forecasts account for external pressures, including fluctuating global energy prices and increased domestic food prices. Karahan noted a downward revision in crude oil price assumptions but adjusted food price forecasts upward due to rising unprocessed food inflation.
Additionally, domestic factors such as earthquake-related expenditures and structural challenges in the housing market have contributed to persistent inflationary pressures.
Governor Karahan highlighted several macroprudential measures implemented by the CBRT to support lira deposits and limit credit expansion. The bank has taken steps to increase the share of lira deposits, reduce FX-linked deposits, and manage liquidity through targeted interventions.
Karahan underscored the importance of aligning fiscal and monetary policies to reinforce the disinflation process, noting, "Our coordinated approach aims to ensure that inflation expectations align with our targets."
Despite revising forecasts upward, Karahan affirmed that the CBRT's policy direction remains unchanged, with no plans for immediate interest rate cuts. "The upward revision in inflation estimates does not indicate a shift in policy stance," Karahan reiterated.
He projected that inflation will stabilize at 5% in the medium term, provided that tight monetary measures and coordinated fiscal policies continue.
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