Turkish central bank watchful of global risks, ready to counter inflation: Governor

The Central Bank of the Republic of Türkiye (CBRT) remains vigilant about potential risks in the ongoing interest-rate cutting cycle, as global economic challenges continue to pose inflationary pressures, Governor Fatih Karahan said.

Speaking at the Emerging Market Economies conference held in Al Ula, Saudi Arabia, on Sunday, Karahan emphasized the bank’s flexibility within the disinflation program. He said the Monetary Policy Committee makes decisions by thoroughly evaluating the economic outlook.

“We ensure the necessary tightness in interest rates to curb current inflation,” Karahan said, adding that the CBRT stands ready to adjust its stance, including pausing or resuming rate cuts, depending on economic indicators.

‘We stand ready to act’

Karahan pointed out that uncertainty surrounding monetary policies in advanced economies, particularly in the United States, poses potential risks for emerging markets like Türkiye.

Noting that inflation surprises, both upward and downward, at the short and long ends of the yield curve have increased the volatility of long-term interest rates, Karahan stated that this presents challenges for emerging markets, affecting capital flows and exchange rates.

The Governor of the Central Bank of the Republic of Türkiye, Dr. Fatih Karahan @yfatihkarahan, noted upside and downside inflation surprises in both short and long end of the yield curve, making long-term rates more volatile. This poses challenges for emerging markets and impacts… pic.twitter.com/BNRyqxnmPc

— AlUla Conference for Emerging Market Economies (@AlUlaCEME) February 16, 2025

“Central banks will need to walk very carefully,” Karahan said, according to Reuters. “Risks are there for a lot of reasons… and we stand ready to act.”

The Turkish central bank has been lowering interest rates for two consecutive months. On Dec. 26, the CBRT implemented its first rate cut in nearly two years with a 250-basis-point reduction, the first since Feb. 23, 2023. In January, it maintained the pace, lowering the policy rate by a further 250 basis points to 45%.

The CBRT has scheduled eight monetary policy meetings this year, increasing the potential for continued interest rate adjustments. The next meeting, where the bank will announce its interest rate decision, is set for March 6.