Conventional policies to be implemented to curb inflation: Şimşek

ISTANBUL

Conventional policies will be employed to curb inflation, Finance Minister Mehmet Şimşek has said, reiterating that there will be a steep fall in inflation in the second half of 2024.

“We will not do anything extraordinary when we bring inflation down, conventional monetary policies will be employed. Monetary tightening will work,” Şimşek said, addressing the Türkiye-Saudi Arabia Investment and Business Forum in Istanbul.

He stressed that the government’s medium-term program aims for price stability.

“We believe we have the right program to get there. We will achieve price stability by 2028… This journey has begun,” Şimşek said.

“We aim to lower inflation to mid-30 percent this year, to around 14 percent next year, and to single digits in 2026… This is a prediction consistent with global experience.”

In a bid to bring inflation under control, the Central Bank has raised its main policy rate by a massive 3,650 basis points since June.

The bank, which delivered another 250-basis point hike last month, is widely expected to keep the one-week repo auction rate steady at 45 percent when its Monetary Policy Committee meets on Feb. 22. This marks the first rate-setting meeting since Fatih Karahan took the helm of the Central Bank on Feb. 3.

The bank said after last month’s MPC meeting that the monetary tightening required to establish the disinflation course was achieved.

[HH] ‘Economic program works’

“We are restoring financial health, repairing the damage caused by the major earthquake, and more importantly, we will implement structural reforms to sustain these gains,” Şimşek also said, stressing that reforms will play a key role in economic growth.

There is strong evidence that the medium-term program is working, he added.

The combination of reasonable policies and structural transformation is a good narrative.

“This narrative will help rebuild investor confidence, increase inflows, and boost the value of the currency. The decrease in inflation will accelerate and the imbalances in the economy will be balanced in this way,” Şimşek said.

This is the way the economic program is planned to work, and it has already started to yield results, the minister added.