Turkish central bank maintains ‘inflation outlook-oriented’ approach, says governor

Central Bank of the Republic of Türkiye (CBRT) would continue to manage the monetary policy insight of its ‘inflation outlook-oriented’ approach, aiming to lower annual inflation to 21% by the end of 2025, the bank’s governor, Fatih Karahan, said on Thursday.

Fatih Karahan said in the central province Eskisehir during an event that with the decline in the risk premium, the foreign interest burden decreased by $7 billion annually.

Stating that the decisive stance in monetary policy has reduced the underlying trend of monthly inflation and strengthened the disinflation process through rebalancing in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations, Karahan said that the increased coordination of fiscal policy will also contribute significantly to this process.

“With the measures taken in the first phase, we prevented inflation from rising to higher levels,” he underlined.

‘Inflation outlook-oriented’ approach

Karahan stated that the tight monetary policy stance will be maintained until there is a significant and permanent decline in the underlying trend of monthly inflation and inflation expectations converge to the projected forecast range.

In this direction, Karahan stated that the level of the policy rate will be determined in a way to ensure the tightness required by the envisaged disinflation process, taking into account inflation realizations and expectations. “The Committee will take its decisions with an inflation outlook-oriented, cautious, and meeting-based approach,” he emphasized.

The country’s annual inflation rate declined to 44.38% in December, while the central bank’s policy interest rate was 47.5%, following a 250-basis-point cut on Dec. 26—the first interest rate reduction since Feb. 22, 2023.

Turkish central bank will announce its new policy interest rate decision on Jan. 23, at 2:00 p.m. (GMT+03).