Fatih Karahan, the Governor of the Central Bank of the Republic of Turkey (TCMB), said the tight monetary policy stance to be maintained until price stability is achieved will strengthen the disinflation process through demand, exchange rate, and expectation channels.
Karahan made the remarks while meeting businesspeople and academics in Erzurum, Turkey, as part of the "Monetary Policy and Macroeconomic Outlook" meetings.
"Interest rate cuts can only be effective when inflation is under control," Karahan said.
31.8% annual inflation
Turkey's annual inflation in July, as stated by the central bank governor.
He noted that annual inflation in Turkey was 31.8 percent in July. He also said the year-end interest rate expectation for the US Federal Reserve (Fed) is 3.97 percent, and for the European Central Bank (ECB) is 2.59 percent.
Karahan reported that they conducted 132 face-to-face meetings with firms in Erzurum and neighboring provinces in 2026, and a total of 1,413 firm meetings over the last 5 years.
"Firm expectations regarding exports are progressing positively," he said.
He also stated that the annual change in production per worker in Turkey was 3.8 percent in the first quarter of 2026.
Updates
Fatih Karahan stated that the Central Bank has utilized qualitative information from face-to-face meetings with various firms since 2013 to support decision-making processes. He noted that while May 2024 marked a period of general inflation decline, disinflation is being aided by decreasing participation in rent and education items. Additionally, Karahan emphasized that the monetary policy stance will be tightened if there is a significant and permanent deterioration in the inflation outlook.
Governor Fatih Karahan noted that inflation has been experiencing a general decline since May 2024, driven partly by decreasing participation in rent and education items and eased cost pressures from workplace rent inflation. He added that while global growth estimates are falling, inflation estimates are rising due to war-related geopolitical developments, though domestic import increases remain more limited than in 2022 due to slowing domestic demand. Furthermore, Karahan stated that the Board will determine the policy rate based on inflation realizations, trends, and expectations, maintaining a cautious approach and tightening the stance if the inflation outlook deteriorates significantly
Fatih Karahan noted that a general decline in inflation has been observed since May 2024, highlighting that decreasing participation in rent and education items, alongside eased workplace rent inflation, is supporting the disinflation process. He further stated that while food prices show high volatility and energy prices have risen due to geopolitical developments, the increase in imports remains more limited compared to 2022 due to a slowdown in domestic demand. Additionally, Karahan emphasized that the monetary policy stance will be tightened should there be a significant and permanent deterioration in the inflation outlook.
