Outflows from investment funds caught up in last month's turmoil have not significantly weakened Turkish residents' preference for lira-denominated assets, the chief of the country's central bank said Wednesday.
Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan said proactive measures had limited potential spillovers from funds subject to trading restrictions, while tight monetary policy supported demand for the lira.
The crisis began after several funds said they could not meet investors' redemption requests during a market sell-off. That prompted a wide investigation into suspected price manipulation in a number of thinly traded stocks.
The Capital Markets Board (SPK) suspended trading in 131 funds run by seven asset management companies and placed them into liquidation, affecting nearly half a million investors.
Last week, Karahan said a significant part of the outflows from funds had moved into bank deposits, which he said had increased by TL 800 billion ($16.2 billion) during the period.
"Fund outflows have not materially weakened residents' preferences for lira assets," Karahan said on Wednesday during the International Monetary Fund and World Bank annual meetings in Bangkok.
"Residents' preference for Turkish lira remains robust overall.”
Karahan reiterated that the bank would maintain its tight policy stance until price stability is achieved, supporting disinflation through demand, exchange rate and expectations channels.
He said interest rate decisions would take into account actual and expected inflation, alongside its underlying trend, to ensure the degree of tightness needed for a disinflation path consistent with the bank's interim targets.
Decisions would remain cautious and be taken on a meeting-by-meeting basis, he added, with further tightening if the inflation outlook deviated significantly from those targets.
Underlying inflation moderates
Karahan said supply-side pressures had slowed disinflation, with energy prices exerting a major influence this year. Nevertheless, underlying inflation was moderating as weaker demand cushioned inflationary pressures.
Türkiye's annual inflation dipped below 30% for the first time in almost five years in September. Consumer price growth eased more than expected to 29.73% from 31.51% in August.
That marked the fourth consecutive month of decline, after the downward trend that started in mid-2024 stalled earlier this year following a sharp rise in energy prices caused by the Iran war.
Monthly price growth also came in below expectations at 1.84%, the same as in August.
Some analysts said the September reading raises the prospect of an interest rate cut at the Oct. 22 meeting.
The bank has kept its benchmark one-week repo rate at 37% this year, as it monitored the inflation impact of the Iran war.
Rent inflation has been easing, with leading indicators pointing to further moderation. However, increases in transportation and communication prices partly offset declines in rent and education inflation.
Karahan said inflation expectations warranted continued caution, while high-frequency indicators confirmed weak domestic demand in the third quarter. Macroprudential policies also supported slower credit growth.
Despite weaker external demand prospects for 2026, Karahan said the trade deficit remained moderate and tourism revenues were close to last year's levels, helping contain the current account deficit.
Türkiye's sliding-scale fuel tax mechanism had restrained fuel price increases, he said, adding that gold price fluctuations amplified volatility in reserve buffers.