CBRT President Karahan made a presentation titled “Monetary Policy and Macroeconomic Outlook” to representatives of the business world and non-governmental organizations in Eskişehir.
Karahan said that the determined stance in monetary policy reduced the main trend of monthly inflation and strengthened the disinflation process through balancing in domestic demand, real appreciation in the Turkish lira and improvement in inflation expectations, and stated that the increased coordination of fiscal policy would make a significant contribution to this process.
“With the measures taken in the first stage, we prevented inflation from rising to higher levels. We established disinflation as of June 2024. We aim to reduce inflation to 21 percent at the end of the year. With the decline in the risk premium, the foreign interest burden decreased by 7 billion dollars annually.” Karahan stated that the tight monetary policy stance will be maintained until a significant and permanent decline in the underlying trend of monthly inflation is achieved and inflation expectations converge to the predicted forecast range.
In this regard, Karahan stated that the level of the policy interest rate will be determined in a way that will ensure the stringency required by the envisaged disinflation process, taking into account inflation realizations and expectations, and continued as follows:
“The Board will make its decisions with a cautious and meeting-based approach focused on the inflation outlook. If a significant and permanent deterioration in inflation is predicted, monetary policy tools will be used effectively.”
Stating that the CBRT has strong communication with the real sector and that face-to-face meetings have been held with companies from different sectors and scales at regular intervals throughout the country since 2013, Karahan said that 500 company meetings have been held in Eskişehir and regional provinces in 2024, and a total of 2 thousand 321 company meetings have been held in the last 5 years. he said.
“Qualified and timely information obtained from interviews is used in decision-making processes.”
CBRT President Karahan stated that the qualified and timely information obtained from company meetings is used in decision-making processes and said, “Information is obtained about structural problems as well as cyclical developments, and the expectations and suggestions conveyed are shared with the relevant public institutions.” he said.
Pointing out that price stability is important for sustainable growth, purchasing power and productivity, Karahan said that they will make the biggest contribution to social welfare by ensuring price stability. Karahan, “Price stability improves the investment and production environment.” he said.
Karahan stated that inflation will decrease with the balancing of demand, normalization in pricing behavior and improvement in expectations.
Stating that the disinflation process continues, Karahan said that goods inflation remains low and the decline in services inflation occurs more gradually.
“BALANCED IN DEMAND CONTRIBUTE TO THE DECLINE IN INFLATION”
Fatih Karahan stated that the balancing of demand contributed to the decrease in inflation. Stating that the pricing behavior of companies on the industrial side has improved, Karahan emphasized that the inflation expectations of consumers and companies have also started to decline.
Karahan said that reserves have increased by 115 billion dollars since the period May 2023-January 2025, and that the improvement in reserves is domestically sourced.
Stating that the decrease in the current account deficit reduced the external financing need by 48 billion dollars between May 2023 and November 2024, and that the ratio of the current account deficit to GDP, which was 5 percent in the second quarter of 2023, decreased to 0.7 percent in the third quarter of 2024, Karahan said that capital inflows started again. expressed.
Karahan emphasized that they do not have any targets regarding the level of the exchange rate and said, “Foreign exchange supply is increasing, foreign exchange demand is decreasing.” he said.
Stating that the TL demand remains strong while the decrease in exchange rate protected deposits (KKM) continues, Karahan said, “Between August 2023 and January 2025, there was a decrease of 111 billion dollars in the KKM balance, while the share of TL deposits increased from 31.6 percent to 59.3 percent. ” he said.
“While the resource inflow increases, the interest cost decreases. After May 2023, a resource inflow of 53.5 billion dollars was realized.” Karahan stated that while Turkey’s exports increased, its imports decreased. Karahan reported that between May 2023 and December 2024, exports increased by 7.7 billion dollars and imports decreased by 32 billion dollars.
Stating that global trade is weak even though it is gradually recovering, Karahan said, “Europe’s goods imports are weak. While Europe’s goods imports are slowing down, our market share in Europe is increasing.” he said.
Stating that industrial production has been following a near-horizontal trend since 2022, Karahan said that the support provided to the real sector continues.
Karahan noted that the use of rediscount loans has increased in general, especially in SMEs.
