Turkey's Fiscal Policy Crucial for Inflation, Says Central Bank Official - Exclusive Interview
In a recent interview, central bank deputy governor Hatice Karahan emphasized the importance of Turkey's fiscal policy in maintaining the downward trajectory of inflation. With aggressive interest rate hikes starting to show results, Karahan stressed the need for strong support from fiscal measures to ensure effective disinflation.
The upcoming announcement of the government's medium-term economic program is seen as a test of Turkey's commitment to tackling inflation. Karahan highlighted the significance of continuing the disinflation process robustly for achieving price stability.
Since last year, the central bank has raised rates to 50% and remains vigilant against inflation risks. Annual inflation has dropped below 52%, driven by base effects and tight policies. To reinforce the rate hikes, authorities have tightened credit conditions and implemented fiscal measures to address the current account deficit.
The Medium-Term Programme (MTP) set to be unveiled this week will outline the government's focus on price stability, combating inflation, and structural reforms. With expectations of revising the budget deficit-to-GDP ratio to 5% or lower, the MTP may introduce new budget measures and deficit projections.
Karahan played a crucial role in Turkey's shift towards a more orthodox central bank policy to combat soaring inflation and currency crises. The country has seen disinflation after a year-long monetary tightening campaign, with monthly inflation remaining volatile.
The central bank forecasts inflation to slow to 38% by year-end and further decline to 9% by 2026. Despite a dip in economic growth in the second quarter, Turkey aims to maintain its disinflation path with continued efforts.
In conclusion, Turkey's fiscal policy, as outlined in the upcoming Medium-Term Programme, will play a vital role in shaping the country's inflation outlook and overall economic stability. Understanding these developments can help individuals make informed decisions about their finances and investments.
