ISTANBUL: Turkiye’s central bank has pledged to keep monetary policy tight amid a deteriorating inflation outlook, saying that it might even pause interest-rate cuts if price pressures intensify.
“We’re not on autopilot. We would assess all options if there was a deterioration in inflation outlook,” governor Fatih Karahan said last Friday in Istanbul, where he unveiled the bank’s latest inflation report.
Those options include changing the pace of rate reductions – 250 basis points thus far – or even putting them on hold, he said.
Karahan said annual consumer inflation is now set to slow to 24% by the end of this year, up from a November forecast of 21%.
The projection serves as a guide for officials who are seeking to hit a target of 5% in the longer term. Inflation is still expected to cool to 12% by the end of 2026.
Turkish stocks and bonds declined after Karahan’s remarks. Borsa Istanbul Banks Index extended its drop to as much as 2.4%, while bonds reversed earlier gains.
The yield on two and 10-year government bonds were up by seven basis points to 38.84% and 27.69%, respectively. The yield on five-year government bonds rose eight basis points to 31.49%.
The most recent forecasts show there remains a gap with investors, who expect annual price growth at about 26% or above at the end of this year.
Inflation in January slowed to 42%, a percentage point higher than anticipated by economists. — Bloomberg
