Central Bank to keep policy tight until inflation declines: Karahan

ANKARA

The Central Bank will maintain its tight policy stance until price stability is achieved, Governor Fatih Karahan has said.

Speaking at a planning and budget commission of the parliament, Karahan reiterated that the bank will not allow a permanent deterioration of the inflation outlook.

The annual inflation is expected to decline to 38 percent at the end of 2024, the bank’s governor said, adding that inflation is forecast to come down to 14 percent next year and 9 percent in 2026.

The annual inflation rate peaked in May due to the base effect, Karahan said.

“This means we have reached the end of the transition period. The decisiveness regarding tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations," he said.

“We will enter a period of disinflation in which inflation will decline steadily for the rest of the year,” Karahan added.

The financial conditions are tight enough to slow down domestic demand, have a positive impact on pricing behavior and strengthen disinflation in the period ahead, the governor said.

The annual inflation has accelerated from 69.8 percent in April to 75.45 percent in May, the Turkish Statistical Institute (TÜİK) said on June 3.

Consumer prices rose by 3.37 percent last month after increasing 3.18 percent in April.

“The worst is over!… The transition period in the fight against inflation is completed, and we are entering disinflation,” Finance Minister Mehmet Şimşek said after TÜİK released the inflation data.