The deputy chief of the Turkish central bank pledged on Wednesday to take a cautious stance amid the Middle East conflict, stressing the monetary authority's focus on containing spillovers.
In line with this, the Central Bank of the Republic of Türkiye (CBRT) is pivoting its focus toward managing expectations and exchange rates to ensure price stability amid the economic fallout from the conflict, an Anadolu Agency (AA) report quoting the deputy said.
CBRT Deputy Governor Hatice Karahan was speaking at the Institute of International Finance (IIF) Global Outlook Forum in Washington, outlining the bank’s strategy in the face of the geopolitical crisis.
Karahan stated that the Middle East crisis is fundamentally a global supply-side shock and that the bank is focused on preventing external disruptions from affecting the Turkish economy, the AA report said.
"Here it is essential to distinguish between ‘temporary relative price changes’ and 'persistent, broad-based inflation,'" she said.
"A stronger policy response is warranted if second-round effects on core inflation, wages and expectations begin to materialize.”
"However, as the central bank of Türkiye, during a supply shock, we have to pay very special attention also to the expectations channel and the exchange rate channel; accordingly, in this recent episode, we have adopted a preemptive policy stance to contain spillovers through these channels. ... We effectively paused the rate-cutting cycle in March and tightened funding conditions," she added.
Karahan also noted that the bank will continue to adopt a cautious, data-driven approach, as it is essential during this process, while anchoring expectations through its tight monetary stance.
Her remarks come a week before the expected and closely-watched Monetary Policy Committee (MPC) meeting, where analysts and investors will look for the next step of the bank following a pause in rate cuts in March.
Annual inflation declined to 30.9% in March despite the pricing pressures from the fallout of the Iran war.
The disinflation continues across all subgroups, albeit at varying speeds, the central bank's chief said earlier this week, according to the text of a presentation made in New York.
