Tight monetary policy stance will strengthen disinflation, says Karahan

ISTANBUL

The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate and expectation channels, Central Bank Governor Fatih Karahan has said.

The official data showed on Dec. 3 that the annual inflation rate stood at 31.07 percent in November, reaching its lowest level in the last 48 months. The figure marked the lowest increase in consumer prices in Türkiye since November 2021, when it was 21.31 percent.

The monthly Consumer Price Index in November also fell to its 30-month low at 0.87 percent.

In a presentation on monetary policy and the macroeconomic outlook in Istanbul, Karahan stated that they attach importance to the progress made toward achieving price stability and noted that both short-term indicators and the medium-term outlook show that disinflation is ongoing and will continue.

Monetary policy stance will be tightened in case of a significant deviation in inflation outlook from the interim targets, Karahan reiterated.

The Monetary Policy Committee (MPC) will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets, he said.

The step size will be reviewed prudently on a meeting-by-meeting basis with a focus on the inflation outlook, Karahan added.

The MPC will hold its next rate-setting meeting on Dec. 11.

Following inflation coming in below expectations, the market now anticipates the Central Bank will cut its policy rate by 150–200 basis points.