New Turkish Central Bank chief pledges to achieve disinflation

By Al Mayadeen English
Source: Agencies
4 Feb 2024 19:12

The newly appointed head of the Turkish central bank (CBRT) Fatih Karahan vowed to maintain elevated borrowing costs until inflation aligns with the bank's targets.

Fatih Karahan, a former Federal Reserve Bank of New York economist, was appointed to replace Erkan (Central Bank of the Republic of Turkey)

The recently appointed head of the Turkish Central Bank (CBRT) declared on Sunday that his primary goal is to ensure the effective control of inflation.

"The main objective and priority for the CBRT is to achieve price stability. Relying on our strong team, we continue our efforts to ensure disinflation," Fatih Karahan said following his appointment on Saturday.

He also pledged to keep borrowing costs elevated until inflation reaches levels aligned with the bank's specified target.

"We will be watchful of inflation expectations and pricing behavior. We stand ready to act in case of any deterioration in the inflation outlook," he added.

In July, Karahan was appointed as the deputy to Hafize Gaye Erkan, who became Turkey's first female central bank governor. Following Erkan's resignation announcement on Friday, Karahan assumed the role.

Today is the first day of our new Central Bank Governor. Once again, I would like to congratulate him on his appointment and wish him success in his new role. I look forward to working with the new governor and his competent team in implementing our economic program.

Governor…
— Mehmet Simsek (@memetsimsek) February 4, 2024

Since the start of 2023, the Turkish lira experienced monthly depreciation, except a respite in August. June 2023 also witnessed a substantial decline of nearly 25%, as the lira fell from 20.8 liras to 26 liras per dollar. The following month saw the exchange rate surpassing 27 liras.

In November 2023, Turkey faced a considerable inflationary surge as it reached approximately 62%, causing concerns about economic stability.

As of December 2023, Turkey's annual inflation was reported at approximately 65%, while the inflation research group ENAG suggested a figure exceeding 127%.

However, the Turkish newspaper Daily Sabah reported that the Central Bank's reserves have skyrocketed in the same month, reaching an all-time high of $145.5 billion, marking an increase of $47 billion since May 2023.

Finance Minister Mehmet Simsek projected a decline in consumer price growth to 34% by the end of the current year.