Turkish Central Bank to Maintain Tight Monetary Policy amid High Inflation

"As per the latest data for April, inflation stood at 69.8 percent, and we anticipate it reaching around 75 percent in May due to base effects," he said while speaking at the Arab Banking Summit in Türkiye's largest city Istanbul.

Organized by the Union of Arab Banks, the two-day summit, convened key stakeholders from governments and the business world, aiming at bolstering cooperation and surmounting challenges by tapping the potential.

The governor noted the bank's interim inflation targets for year-end 2024, 2025, and 2026 are 38 percent, 14 percent, and 9 percent, respectively.

Highlighting the benefits of the tight monetary policy for the banking sector, Karahan said "despite the high inflation environment, the banking sector continues to maintain its profitability. We are observing a significant increase in Turkish lira deposits."

"The regulations we have implemented will facilitate the sterilization of excess lira liquidity, support the transition to lira deposits, and prevent excessive credit growth," Karahan added.

Karahan also mentioned a growing appetite among foreign investors for the Turkish banking sector, driven by "policy normalization" and a decline in Türkiye's risk premium.

"Both public and private banks issued numerous long-term Eurobonds in 2023 and this year. Since last September, Eurobond issuances have totaled approximately 13.8 billion U.S. dollars. This year alone, total Eurobond issuances have reached 7.8 million dollars, with additional subordinated debt issuances amounting to 4.1 billion dollars," he said.

Türkiye abandoned years of easing policies after last year's general elections, won again by President Recep Tayyip Erdogan and his ruling coalition.

In last June, the central bank's newly appointed administration delivered aggressive tightening aimed at cooling demand to curb inflation. The central bank has raised its key one-week repo rate from 8.5 percent to 50 percent since June 2023.

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