CBRT Reaffirms Tight Monetary Policy Amid Market Uncertainty
cbrt
The Central Bank of the Republic of Turkey (CBRT) has reiterated its commitment to a tight monetary policy, following mixed market reactions to the Inflation Report presentation by Governor Fatih Karahan and other CBRT officials.
While some analysts interpreted the increase in the inflation target as a signal for gradual interest rate cuts, others argued that the CBRT would proceed with fewer rate cuts than expected, leading to a sell-off in banking stocks on Borsa Istanbul.
In response to the speculation, the CBRT released a video titled "Monetary Tightening with Data", aiming to reinforce its stance on maintaining strict monetary policies.
Key Highlights from the CBRT Video Message
- Inflation control efforts since June 2023 have prevented prices from spiraling further.
- Disinflation was achieved as of June 2024, with year-end inflation falling to 44.4%.
- Inflation expectations among consumers and businesses are gradually improving.
- Interest costs are declining, contributing to an estimated $35 billion in interest savings over the next five years.
- The share of Turkish lira deposits has surged from 31.6% to 59.4%, while currency-protected deposits fell by $114 billion.
- The 12-month cumulative current account deficit shrank by $48 billion, reducing the deficit-to-GDP ratio from 5% to 0.7%.
- CBRT reserves reached record highs, with gross international reserves surpassing $166 billion and net reserves (excluding swaps) increasing by $126 billion.
- Inflation is projected to fall to 24% by the end of 2025, aligning with the central bank’s long-term disinflation strategy.
