Economy Update – Follow-Up
In a recent statement, the Governor of the Turkish Central Bank, Fateh Karahan, affirmed that the institution is “prepared to implement measures” to address risks arising from the current trajectory of interest rates.
Speaking at the Al-Ula conference for emerging market economies in Saudi Arabia, Karahan highlighted that the bank has systematically decreased interest rates since December. This process has resulted in a reduction of 250 basis points in the main interest rate over December and January.
Karahan further emphasized that the central bank “is not operating in an automated mode” following two successive rate reductions. He indicated that adjustments to interest rates would depend on evolving economic data.
Moreover, the Turkish Central Bank has recently revised its inflation forecast for year-end from 21% to 24%. Karahan noted that the latest series of interest rate cuts may not necessarily be sustained going forward.
He also remarked on the uncertainty surrounding the monetary policies of advanced economies, particularly the United States, which poses risks to emerging markets, including Turkey. “This indicates that central banks need to exercise caution due to various underlying risks… and we are poised to take the necessary measures,” he stated.
Currently, the interest rate stands at 45%. The Turkish Central Bank maintained the rate at 50% for the eight months leading up to December. According to recent projections, the interest rate may decline to 30% by the end of the year.
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