Fatih Karahan signals 'tightening' in monetary policy

Central Bank of the Republic of Turkey (CBRT) Governor Fatih Karahan met with investors in New York, USA. In a presentation also published on the bank's website, Karahan made critical assessments regarding monetary policy. Emphasizing that the tight monetary policy stance will continue until price stability is achieved, Karahan stated that these steps will support the disinflation process through demand, exchange rate, and expectation channels.

"MTP WILL CONTRIBUTE TO DISINFLATION"

Karahan stated that the macroeconomic framework set out in the Medium-Term Program (MTP) will provide significant contributions to the disinflation process.

CAUTIOUS APPROACH TO INTEREST RATE DECISIONS

Stating that steps regarding the policy rate will be determined by taking into account inflation realizations, the main trend, and expectations, Karahan expressed that these decisions will be consistent with intermediate targets and will provide the tightness required for disinflation. Karahan also noted that interest rate steps will be taken on a meeting-by-meeting basis with a cautious approach.

"ADDITIONAL TIGHTENING IF NECESSARY"

Karahan specifically emphasized that "monetary policy will be tightened further if the inflation outlook deviates significantly from intermediate targets." He also stated that indicators regarding the main trend of inflation point to the continuation of the disinflation process.

SERVICES INFLATION AND RESERVES

Stating that an increase in monthly services inflation is expected due to the back-to-school period, Karahan underlined that the tight monetary policy is also strengthening reserves.