At the Eurometal Steel Day & YISAD Flat Steel Conference held at Istanbul Marriott Hotel Asia on Tuesday, April 8, in cooperation with SteelOrbis, Dr. Fatih Karahan, governor of the Central Bank of the Republic of Turkey (TCMB), gave a presentation titled, “Macroeconomic outlook and monetary policy in Turkey”. Stating that uncertainties regarding global trade and economic policies have increased recently, Mr. Karahan noted that Turkey’s comprehensive tax package has affected economic growth and inflation expectations, while he highlighted that the volatility of the global financial markets has gained momentum.
Stating that recession expectations have a downward effect on long-term bond interest rates, he noted that commodity prices have decreased significantly recently.
Commenting on domestic economic activities, the TCMB governor stated that the composition of demand was more balanced in 2024. Noting that production indications signal a recovery in economic activities, he added, “Domestic demand is moderate but somewhat resilient.”
Highlighting that Turkey’s current account deficit has reached historically low levels, Mr. Karahan stated that Turkey’s share in export markets has increased despite weak demand in foreign countries. He noted that Turkey’s foreign trade balance, excluding gold and energy, is stable.
Stating that the disinflation process in Turkey is continuing, the TCMB governor commented, “The main trend of inflation was bullish in the first quarter this year. Following the decline in goods inflation, a decrease in services inflation is also becoming more apparent.” He went on to say that the commodities with a strong indexing tendency to the past push up services inflation. Highlighting that the increases in costs have lost momentum, Karahan stated that inflation expectations are bearish.
Speaking about the measures implemented amid recent financial market developments, Karahan pointed out that at the Interim Meeting of the Monetary Policy Committee of the TCMB, the bank decided to raise the overnight lending rate to 46 percent from 44 percent and stabilize the policy rate at 42.5 percent. Speaking also about TCMB’s Turkish lira and foreign currency liquidity management, he stated that the bank has suspended timed repo auctions.
In addition, noting that the bank has extended the terms of warehouse auctions, the TCMB governor stated that the bank has also started issuing liquidity bills with maturities up to 91 days and conducting Turkish lire-settled foreign exchange forward selling transactions.