CBRT Ready to Act Amid Rate Cuts, Says Governor Karahan

Turkish Central Bank Governor Fatih Karahan affirmed that the bank remains "ready to act" against potential risks in its ongoing rate-cutting cycle, speaking at an emerging market economies conference in Saudi Arabia on Sunday.

Cautious Approach in Rate Reduction Strategy

The Central Bank of the Republic of Türkiye (CBRT) has lowered its policy rate by 250 basis points each in December and January, bringing it down to 45% from 50%. Despite this trend, Karahan emphasized that the bank is not on autopilot, signaling that future rate adjustments will be data-driven and not predetermined.

"This is not an easing cycle, but an interest rate reduction cycle. We are continuing while maintaining tightness," Karahan reiterated at an earlier news conference in Istanbul.

Global Risks and Impact on Emerging Markets

Karahan acknowledged that uncertainty in advanced economies—particularly the U.S.—poses risks for emerging markets like Türkiye.
"That means that central banks will need to walk very carefully," he cautioned, emphasizing the importance of a measured approach to monetary policy.

Inflation and Future Policy Outlook

Türkiye’s annual inflation eased to 42.12% in January, though monthly inflation surged to 5.03%, driven by minimum wage hikes and price adjustments. The CBRT expects inflation to decline to 24% by year-end, aligning with its monetary policy objectives.

According to a Reuters poll, the policy rate is projected to drop to 30% by the end of 2024. However, Karahan reiterated that the CBRT’s decisions remain data-dependent, adjusting its policy as necessary to maintain economic stability.