Governor Karahan underscored a continued commitment to “decisive monetary policy” aimed at achieving sustainable price stability, projecting year-end inflation targets of 44% for 2024 and 21% for 2025.
During his speech, Karahan highlighted the central bank’s ongoing efforts to reduce inflation through a combination of high-interest rates and targeted macroprudential measures. He noted a gradual reduction in consumer inflation, down to 48.6% in October from a peak in May, and an improvement in core inflation indicators, though progress has been slower than initially anticipated.
Karahan emphasized that domestic demand has declined to levels supportive of disinflation and that the output gap, which measures the difference between actual and potential economic output, has reached negative levels, reinforcing the bank's efforts to curb inflation. He also reported improvements in the foreign trade balance and a reduction in the current account deficit to 1.7% of GDP in the second quarter, in line with monetary tightening efforts.
The Governor provided a detailed overview of global economic influences, including geopolitical risks and commodity price volatility, which have added pressure to inflation trends worldwide. He mentioned the impact of recent rate cuts by the U.S. Federal Reserve, noting a shift toward monetary easing among some central banks in emerging markets as inflationary pressures moderate.
Domestically, Karahan addressed factors contributing to inflation in various sectors. In particular, he highlighted stubborn inflation in the services sector, partly due to elevated rents and school tuition costs. In response, the central bank is applying targeted macroprudential policies to restrain consumer loan growth and increase the share of Turkish lira deposits, which has reached 56% as confidence in the Turkish lira strengthens.
Looking ahead, Karahan said the central bank remains committed to its tight monetary stance, with a medium-term inflation target of 12% by the end of 2026 and a long-term goal of stabilizing inflation at 5%. He projected further moderation in inflation driven by controlled domestic demand, a stronger Turkish lira, and improved inflation expectations.
The Governor also presented a detailed analysis of inflation drivers, such as food prices and administered energy prices, and acknowledged challenges posed by recent increases in non-energy commodity prices.
The press briefing concluded with a Q&A session, where Karahan, along with the bank’s Deputy Governors, answered questions from participants. (ILKHA)