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Türkiye’s central bank will maintain its tight monetary policy stance until price stability is achieved, according to its Governor, Fatih Karahan, who said the fall in inflation was continuing across the board.
In a presentation in New York on Wednesday about Türkiye’s monetary policy and inflation outlook, Karahan also said the macroeconomic framework outlined in the government’s medium-term program would contribute to the disinflation process.
He added the monetary policy stance would strengthen the disinflation process through demand, exchange rate and expectations channels, but stressed it would be tightened in case of a significant deviation in the inflation outlook from interim targets.
Annual inflation dropped to below 33% in August, though food and services prices continue to pressure prices, according to official data.
The government’s newly updated medium-term program expects it to slow to 28.5% this year and to 16% in 2026 before dropping to single digits the following year.
The Central Bank of the Republic of Türkiye (CBRT) estimates it will fall to about 24% by the end of 2025, with a forecast range of 25%-29%. Policymakers are aiming to cut it to 16% by the end of next year and 9% by end-2027, according to the central bank estimates.
In the presentation, which the central bank published on Thursday, Karahan said the bank would determine the policy rate by taking into account realized and expected inflation, and its underlying trend.
The size of these steps will be reviewed with a cautious, meeting-by-meeting approach focused on the inflation outlook, he added.
According to Karahan, indicators related to the underlying trend of inflation suggest that disinflation will continue.
The bank on Sept. 11 cut its benchmark policy rate for the second consecutive month. The one-week repo rate was lowered by 250 basis points to 40.5%, following a 300-basis-point cut in July.
The CBRT had raised its policy rate to 46% in April amid market volatility following the arrest of Istanbul Mayor Ekrem Imamoğlu on graft charges. Before that, the bank had begun a gradual easing cycle in December as inflation retreated from a peak of 75% in May 2024.
Monthly service inflation is expected to rise, Karahan said on Wednesday, led by the back-to-school effect, adding that the tight stance is supporting reserves.
