Economic news

Turkey’s new central bank chief vows tight policy till inflation drops

2024.02.08 05:48


© Reuters. FILE PHOTO: A emblem of Turkey’s Central Bank is pictured on the entrance of its headquarters in Ankara, Turkey October 15, 2021. REUTERS/Cagla Gurdogan/File Photo

By Tuvan Gumrukcu, Huseyin Hayatsever and Nevzat Devranoglu

ANKARA (Reuters) -Turkey’s central bank will preserve a tight policy stance till inflation drops to focus on, the bank’s new head mentioned on Thursday, conserving a year-end inflation forecast of 36% regardless of expectations it would must rise.

Presenting a quarterly inflation report in Ankara, Fatih Karahan – appointed to the publish on Saturday after a shock shuffle – stored all choices open, saying the bank would reassess its stance ought to there be a major deterioration within the inflation outlook.

He mentioned one other fee hike was not at present wanted nevertheless it was too early to speak about easing, pushing off any expectations of a fast easing cycle and reinforcing analysts’ views that he’ll stay hawkish till inflation begins to chill round mid-year.

The bank hiked its key rate of interest to 45% from 8.5% in June and signalled final month that the tightening cycle was full.

“We are determined to maintain the necessary monetary tightness until inflation falls to levels consistent with our target,” Karahan, who had been a bank deputy governor since July, mentioned in his first in-person feedback as chief.

INFLATION RELIEF

Turkey’s inflation fee climbed to an annual 64.9% final month, having risen 6.7% on a month-to-month foundation on the again of some large one-off annual worth rises and a 49% minimal wage improve.

Karahan mentioned that, though January’s inflation was increased than anticipated, the minimal wage rise alone wouldn’t derail the central bank’s projections, that are decrease than these of many analysts.

A Reuters ballot of economists suggests inflation will drop to round 42% by yr finish.

The central bank held its inflation forecasts out to end-2026, when it’s seen falling to 9%. “Rapid disinflation” will start after inflation peaks in May of this yr, Karahan mentioned.

FIFTH BANK CHIEF IN FIVE YEARS

Karahan was appointed after the shock resignation final Friday of former bank governor Hafize Gaye Erkan, who cited the necessity to shield her household from what she known as a media smear marketing campaign.

The first girl to run the bank, Erkan started aggressive financial tightening in June to chill inflation, orchestrating a dramatic U-turn after years of straightforward cash and hovering costs beneath President Tayyip Erdogan.

Karahan, a former Federal Reserve Bank of New York economist, is the fifth governor Erdogan has named in as a few years. As deputy, he performed a key position designing the tightening cycle.

“We have announced that we completed the tightening cycle but it is too early to talk about a rate cut,” Karahan mentioned.

He added that the central bank anticipated the easing cycle to start barely later than it had anticipated at its final inflation replace in November.

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