CBRT Governor Fatih Karahan, in an interview with Bloomberg, stated that adjustments to policy interest rates should be made to meet inflation targets for 2025 and beyond. Speculations about a potential rate cut emerged after inflation decreased in June, but Karahan emphasized the need for a cautious approach.
The CBRT expects inflation to decrease to 38% by the end of the year, 14% by the end of 2025, and 9% by the end of 2026. Karahan highlighted the importance of achieving these targets to gain credibility and expressed the desire to see clearer improvements in household and firm expectations.
Despite the June inflation figure being lower than expected, Karahan noted that it was too early to determine if this decline is significant and lasting. He also mentioned that increases in electricity and regulated prices in July were expected to add 1.5 percentage points to monthly inflation.
Karahan stated that high interest rate policies had led to a real appreciation of the Turkish lira, although this had not been intentionally engineered. He explained that this policy had reduced domestic demand and anchored inflation expectations.
Karahan emphasized that the CBRT would continue to accumulate reserves, prioritizing disinflation as their primary goal. He also mentioned plans to review deposit agreements with foreign central banks to reduce foreign exchange liabilities.
