Türkiye's new central bank chief pledges "gradual and decisive" measures to tackle soaring inflation

During her inaugural major press conference since assuming the position in June, Erkan stated: "We embarked on a monetary tightening process to bring inflation down permanently. We will further strengthen monetary tightening as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved."

Erkan emphasized that her team is closely monitoring inflation indicators and underlying trends, affirming their commitment to using all available tools in alignment with the primary objective of ensuring price stability.

Revising previous forecasts, Erkan projected that inflation would soar to 58 percent by December, significantly higher than the previous estimate of just over 22 percent. The rise in price growth is expected to be fueled by the lira's depreciation this year, soaring food prices, and substantial increases in the minimum wage.

Addressing the economic imbalances resulting from massive stimulus measures prior to May's election, Erkan attributed the record current account deficit in the first five months of 2023 to an increase in consumer goods imports.

Erkan, a former Wall Street banker appointed after President Recep Tayyip Erdoğan's re-election, assured that the central bank's approach to monetary policy would be "holistic." This means that in addition to raising interest rates, the bank would take steps to curb overheating demand and slow bank lending. As part of its "selective credit tightening" strategy, the central bank recently reduced the monthly limit on commercial loan growth.

"Data is very valuable," said Erkan, highlighting the central bank's reliance on quantitative analysis in its decision-making process, leveraging her expertise in developing mathematical risk management models.

In response to concerns about the central bank's independence, Erkan assured that it would remain "completely independent" from government pressure, with its decisions purely driven by scientific considerations.

Amidst doubts from economists about the extent of rate increases, Erkan emphasized the need for careful and precise steps, suggesting a cautious approach to monetary policy adjustments.

Erkan's statements come at a critical juncture for Türkiye's economy as it grapples with surging inflation and seeks to restore stability and confidence in its monetary framework. (ILKHA)