Şimşek reiterates 'full support' for Central Bank

ANKARA

Finance Minister Mehmet Şimşek has reiterated his “full support” for the country’s Central Bank, as the bank announced additional monetary tightening measures to fight inflation.

“Disinflation requires time and determination. We will continue to work with patience and determination until price stability is achieved,” Şimşek wrote on social media X, noting that monthly inflation was above expectations in February.

Last month, consumer prices increased by 4.53 percent from February, bringing the annual inflation rate from 64.86 percent to 67.07 percent.

Even though it was above expectations, the monthly inflation rate eased from 6.7 percent in January.

“We have full support for the Central Bank. The Central Bank’s additional tightening steps will contribute to balancing growth, narrowing the current account deficit and breaking inflationary tendencies,” Şimşek said.

The bank on March 6 announced additional tightening measures “to reinforce its commitment to tight monetary policy stance.”

As part of those steps, the monthly growth limit for the Turkish Lira commercial loans, previously set at 2.5 percent, has been reduced to 2 percent.

But loans targeting exports, investments, agriculture and tradesmen as well as loans extended to public institutions and in the earthquake zone will remain exempt from this restriction.

Also, the monthly growth limit for general purpose loans, previously set at 3 percent, was revised down to 2 percent, while the 2 percent limit for vehicle loans remains unchanged.

“Besides the securities maintenance practice, additional work is being carried out on introducing reserve requirements based on loan growth to enhance the effectiveness of measures pertaining to growth limits,” the bank said in a statement.

Moreover, further measures are being assessed to strengthen the monetary transmission mechanism, it added.

At the Monetary Policy Committee (MPC) meeting held in February, the Central Bank held its key interest rate at 45 percent, pausing after eight straight increases aimed at taming consumer prices.

The next rate-decision meeting is scheduled for March 21, only days ahead of the local elections at the end of the month.

The Central Bank’s inflation forecasts for 2024 and 2025 are 36 percent and 14 percent, respectively.

Meanwhile, Vice President Cevdet Yılmaz said the fight against inflation will accelerate much more in 2025.

“In the medium term, we are determined to reach single-digit inflation rates again within the framework of our sustainable development goals, Yılmaz wrote on X.