Treasury and Finance Minister Mehmet Şimşek met with dozens of international investors on Friday and pledged to continue hiking interest rates, even as economic growth slows.
The eight-hour meeting in Istanbul included Finance Minister Mehmet Simsek and Central Bank Governor Hafize Gaye Erkan and 40 investors discussing monetary and fiscal policy and the economic outlook.
The meeting marks a more transparent market turn by the authorities. It comes two months after President Tayyip Erdoğan named Şimşek, who is highly regarded by financial markets, as well as Erkan, a former senior U.S.-based bank executive, in moves seen as heralding a switch to tighter interest rate policy.
According to the sources, Şimşek stressed that reducing inflation was the priority and struck a confident tone that policy was returning to more normal settings.
He told investors that Erdoğan fully supported the monetary tightening and that "gradual" rate hikes would continue, pinching credit and leading to somewhat slower economic growth but not a sudden stop, one of the sources said.
The central bank under Erkan has raised its key rate by 900 basis points to 17.5% since June, though the pace of tightening missed market expectations. Last week it more than doubled its year-end inflation forecast to 58%, meeting expectations.
Under the previous governor, the bank had slashed rates to 8.5% from 19% in 2021, in line with Erdoğan's unorthodox belief that high rates fuel inflation. That sparked a currency crisis and the lira weakened 44% in 2021, 30% in 2022, and another 30% so far this year.
Inflation touched a 24-year peak of 85.5% last October. It eased but rose sharply again in July to nearly 48%.
The meeting was hosted by Wall Street bank JPMorgan, with the participation of Vice President Cevdet Yilmaz, Ziraat Bank CEO and Turkish Banking Association head Alpaslan Cakar and the heads of Türkiye's wealth fund and treasury debt office were also scheduled to speak; the program showed.
