CBRT Governor: Firm Monetary Policy Until Inflation Permanently Falls
fatih karahan
In a recent address at the German-Turkish Chamber of Commerce and Industry (AHK) Economy meeting, Fatih Karahan, governor of the Central Bank of the Republic of Türkiye (CBRT), reaffirmed the bank’s “tight monetary policy stance” as the cornerstone for achieving lasting price stability.
He stressed that “we will maintain our tight monetary policy stance until we achieve a permanent fall in inflation and price stability.” This strategy, Karahan noted, would remain in place to curb market volatility and guide the nation toward sustainable economic growth.
Swift Action and Market Coordination
Recent financial market fluctuations have sparked concerns over value declines in Turkish assets. Karahan explained the CBRT’s proactive interventions, stating, “We took swift action to ensure that the market volatility is temporary and its effects on the economy are short-term.” He also highlighted the importance of ongoing dialogue with stakeholders, adding, “We keep our two-way communication channels open at all times.”
Economic Recovery and Consumer Demand
Karahan observed that economic activity in Türkiye picked up late in 2024, bolstered by private consumption expansions linked to shopping campaigns and upcoming wage adjustments. He mentioned that net exports also added momentum to growth, complementing industrial production gains.
The governor pointed to a moderate recovery in services—particularly in professional, scientific, and technical industries—and said the Services Production Index signaled a positive trend even in sectors less driven by consumer spending.
Inflation Trends and External Factors
Karahan underscored the disinflation process that began in June 2024, with consumer inflation easing to 39.1% in February. However, he cautioned against complacency, noting that Ramadan could exert additional pressure on food prices, while recent market developments may rekindle inflationary risks in April.
Despite these challenges, “We resolutely maintain our tight monetary policy stance to ensure price stability, which is our main objective,” Karahan stated, reiterating the bank’s resolve to manage macroeconomic risks proactively.
Steady Exports and Manageable Current Account
In assessing Türkiye’s export performance, Karahan emphasized the country’s resilience amid weak foreign demand. He highlighted that exporters continued to capture a larger share of an otherwise slow EU import market, showcasing Turkey’s competitive edge.
While acknowledging a slight rise in the current account deficit in 2025, Karahan explained that global trade uncertainties and increased consumer goods imports contributed to this shift. He nonetheless projected that the deficit would stay below long-term averages over the course of the year.
Policy Measures and Liquidity Tools
The CBRT has taken multiple steps to address market volatility, including raising the overnight lending rate from 44% to 46%, keeping the policy rate at 42.5%, and suspending one-week repo auctions temporarily. Additionally, foreign currency liquidity measures have been expanded, with the bank initiating TL-settled forward foreign exchange sales (NDF) to shield companies from exchange-rate fluctuations.
These moves, Karahan said, reflect a broad and powerful toolkit: “We will determine our steps with a proactive approach to limit the macroeconomic effects of market volatility.”
Commitment to Stability
In closing, Karahan offered an assurance that Türkiye’s economic fundamentals remain strong. He repeated the CBRT’s commitment to price stability, declaring, “We will maintain our tight monetary policy stance until we achieve a permanent fall in inflation and price stability… In case of a significant and permanent deterioration in inflation, we will tighten our monetary policy stance.”
Such messaging underlines the bank’s focus on financial market coherence, domestic economic confidence, and global perceptions of Turkey’s monetary and fiscal discipline—all essential ingredients in fostering long-term prosperity.
