Treasury and Finance Minister Mehmet Şimşek on Wednesday said Türkiye's monetary policy was tight enough to anchor inflation expectations, emphasizing that ensuring price stability is at the core of the government's economic policies.
"We have a monetary policy stance that is sufficiently tight enough to anchor inflation expectations," Şimşek said during a panel on the sidelines of the Qatar Economic Forum in Doha.
The minister said the government "will do what it takes" to address inflation "because our number one policy priority is attaining price stability."
"Unfortunately, we have high inflation, but now we have a credible, robust program to bring it down."
The annual inflation rate currently runs at nearly 70% and is expected to peak at 75%-76% in May before falling to 38% at year-end, according to the Central Bank of the Republic of Türkiye's (CBRT) forecast.
Şimşek reiterated expectations for a steep downward trend this summer.
"Once the year-over-year inflation begins to come down, I'm absolutely convinced that domestic population and local actors in terms of businesspeople and others will come around."
He said "it takes time" and that there is a "bit of inertia" in services, which he says is "understandable."
"But delivery will be the key."
Following last year's presidential and parliamentary elections, Türkiye moved away from years of easing monetary policy. The central bank embarked on an aggressive rate hike cycle, raising its benchmark policy rate by 4,150 basis points to 50% since last June.
The government has endorsed an economic program centered around taming inflation, rebuilding foreign exchange reserves and curbing current account and budget deficits.
Şimşek said Türkiye had a period where policy choices "created some issues and challenges," which he says is "largely behind us."
He stressed that the process of correcting monetary policy "is largely done."
"Now it's our turn. We are going to tighten fiscal policy to support disinflation," the minister said.
"Income policies are going to be more supportive, but the key is structural reforms. Through structural reforms, we hope to boost productivity and enhance competitiveness."
Şimşek went on to commend the central bank for its efforts.
"The central bank is doing a great job," he noted, stressing that it's time that they provide additional support, referring to a package of savings measures the government announced last week.
"We're going to reorientate investments to more productive areas. That's key. But we're also going to cut certain spending to create more fiscal room."
"Tightening fiscal stance will help disinflation," said Şimşek.
He said they are pushing through with structural reforms "aggressively."
A day earlier, Fatih Karahan, the governor of the CBRT, reaffirmed the commitment to maintain a tight monetary policy to reduce inflation.
Karahan stressed their awareness of upward risks to inflation and reiterated the monetary authority's readiness to act if necessary.
"Market expectations differ concerning inflation. Our expectation is at 38%, while the market's expectation is at 44%," he remarked, expressing optimism about a decline in inflation toward the end of the year.
Karahan predicted a shift to disinflationary conditions in the second half of 2024, stating, "We are on the brink of a significant decline in headline inflation."
"We are aware of the upward risks in inflation, and we will do our best to reduce it. Our long-term target for inflation is 5%. We are determined to maintain our tight monetary policy," the governor said.
He recognized high prices as the primary concern for Turkish citizens.
"Our most substantial contribution to social welfare will be to restore price stability," he asserted.
Şimşek stressed Türkiye is rebalancing growth and changing its composition.
Türkiye is pursuing sustainable high growth, and not boom and bust episodes," said the minister. "And that's really where price stability comes in."
He said that's "absolutely at the core" of the government's economic program that they are committed to delivering because "it's very difficult to operate in a high inflationary environment."
Karahan also commented on growth expectations for this year, suggesting a potentially lower rate compared to the previous year, which was strong and supported by domestic demand.
