Inflation message from Central Bank Governor Karahan: Our goal is price stability

Central Bank Governor Fatih Karahan emphasized that they will take the necessary measures if demand indicators negatively affect the disinflation process. (A News archive)

"WE WILL TAKE NECESSARY PRECAUTIONS"

Karahan emphasized that they closely monitor demand indicators and will take the necessary measures if developments in demand conditions negatively affect the disinflation process, and reported that the 12-month cumulative current account deficit as of February was 12.8 billion dollars due to the increase in gold and energy deficits despite the high level of the services balance surplus. Karahan reported that the disinflation process that started last year continued in the first quarter of this year, and reminded that they reduced the policy rate to 45 percent in January and 42.5 percent in March in parallel with developments in inflation. Karahan stated that they continue to take macroprudential measures in 2025 in order to maintain macrofinancial stability, support a tight monetary stance and increase the effectiveness of the monetary policy transmission mechanism, and that developments in domestic and foreign financial markets in March and April caused value losses in financial assets. Karahan said that they urgently took additional steps supporting the monetary transmission mechanism so that these developments do not disrupt the macroeconomic outlook.

Karahan announced that the Monetary Policy Committee held an interim meeting on March 20 and took measures to support the tight monetary stance, and continued his words as follows: "In this regard, we increased the Central Bank's overnight lending rate from 44 percent to 46 percent. In addition, we suspended one-week repo auctions for a while. Thanks to this, the increase in indicators that exhibited excessive volatility on March 19 remained more limited. On April 17, we increased the policy rate from 42.5 percent to 46 percent. In addition, we increased the Central Bank's overnight lending rate from 46 percent to 49 percent and the overnight borrowing rate from 41 percent to 44.5 percent. We are closely monitoring the potential effects of increasing protectionist tendencies in global trade on the disinflation process through global economic activity, commodity prices and capital flows."

Reminding that they have taken measures for Turkish lira and foreign exchange liquidity in order to limit market volatility, Karahan stated that within this scope, they have extended the maturities of Turkish lira deposit auctions, increased the diversity of liquidity instruments and started to issue liquidity bills with maturities of up to 91 days, and made direct bond purchases to support the effective functioning of the bond market.

Karahan said they will use monetary policy tools with determination. (A News archive)

"WE WILL CONTINUE TO USE MONETARY POLICY TOOLS WITH DETERMINATION"

Karahan stated that they have started Turkish lira settled forward foreign exchange sales transactions for foreign exchange liquidity and made the following assessments: "We will continue to closely monitor liquidity conditions and use liquidity management tools effectively. We will continue to use all monetary policy tools resolutely within market rules in order to ensure the effective functioning of financial markets. We will determine our steps with a proactive approach in order to limit the macroeconomic effects of volatility in the markets. We will maintain the tight monetary policy stance until a permanent decrease in inflation and price stability are achieved, and in this direction, we will determine the policy rate in a way that will provide the tightness required by the anticipated disinflation process by taking into account inflation realizations, main trend and expectations. If a significant and permanent deterioration in inflation is anticipated, we will tighten our monetary policy stance."

"WE WILL CONTINUE OUR WORK WITH DETERMINATION AND DEDICATION"

Reminding that they have taken steps to use technology and financial infrastructure more intensively and effectively, Karahan said, "We continued our work in 2024 to increase competition and innovation in the field of payments within the scope of FAST and to provide new and value-added services. We gradually increased the FAST transaction amount limits. We worked to ensure uninterrupted circulation of the Turkish lira, modernize the hardware and software of the banknote processing system used in our branches, and increase our banknote processing capacity."