Fatih Karahan announces year-end inflation target

Central Bank of the Republic of Turkey (CBRT) Governor Fatih Karahan met with representatives from the business world and non-governmental organizations in Eskişehir.

Delivering a presentation titled 'Monetary Policy and Macroeconomic Outlook,' Karahan explained the goals for the economy.

INFLATION TARGET: 21 PERCENT

Karahan stated that the determined stance in monetary policy contributes to rebalancing domestic demand, real appreciation of the Turkish lira, and improvements in inflation expectations. Noting that these steps support the downward trend in monthly inflation, Karahan emphasized that they aim for inflation to fall to 21 percent by the end of the year. He also reported that the risk premium has decreased due to the measures taken, which has provided an annual interest burden saving of 7 billion dollars.

DISINFLATION PROCESS AND MONETARY POLICY

Stating that the disinflation process began as of June 2024, Karahan said, "Tight monetary policy will be maintained until a permanent decline in monthly inflation is achieved and expectations approach the target range." Adding that the policy rate will be set at a level consistent with disinflation targets, Karahan expressed that the committee will make its decisions with a cautious and inflation-focused approach.

THE IMPORTANCE OF PRICE STABILITY

Pointing out that price stability is fundamental for sustainable growth, purchasing power, and social welfare, Karahan stated that close cooperation with the real sector supports decision-making processes. Karahan noted that feedback received from firms sheds light on public policies.

IMPROVEMENT IN CURRENT ACCOUNT DEFICIT AND RESERVES

Announcing that reserves have increased by 115 billion dollars since May 2023, Karahan stated that the ratio of the current account deficit to GDP has declined from 5 percent to 0.7 percent. Furthermore, stating that they do not have any target regarding the exchange rate level, Karahan said, "While foreign currency supply is increasing, demand is decreasing; this situation points to strong demand for the TL."

EXPORTS INCREASING, IMPORTS DECREASING

Karahan stated that Turkey's exports have increased by 7.7 billion dollars while imports have decreased by 32 billion dollars. He drew attention to the fact that Turkey has increased its market share despite Europe's weak import performance.

INDUSTRIAL PRODUCTION AND SUPPORT FOR SMES

Stating that industrial production has followed a stable course since 2022, Karahan emphasized that support provided to the real sector continues. He added that rediscount credits, particularly for SMEs, have been extended to a wide segment.

News Source: 12punto