Türkiye will maintain its tight monetary policy and keep fiscal discipline to further lower inflation, Vice President Cevdet Yılmaz pledged on Saturday.
Turkish annual consumer price inflation eased to 30.65% in January, official data showed earlier this month, thus continuing a downward momentum observed since the middle of 2024, when it stood at over 70%. It is at the lowest level since late 2021.
However, month-over-month inflation advanced by a higher-than-expected 4.84% in January, driven in part by new year price adjustments and a jump in prices of food and nonalcoholic drinks.
Speaking at an event in the southeastern province of Siirt, Yılmaz said the 45-point fall in inflation since May 2024 was not enough, adding the government was on a path to further lower consumer prices.
"We will maintain our tight monetary policy, and we will keep our disciplined fiscal policies. We are determined to do this. But these are not enough either," he said.
"On the other hand, we have to contribute to our battle with inflation through our supply-side policies," he added.
"We believe supply-side policies are very important, both in terms of our macroeconomic policies and in general. In May 2024, inflation was at 75.5%. It recently fell to 30.6%, a decrease of approximately 45 percentage points. Is that enough? No. We want it to fall even further. That is our direction," Yılmaz asserted.
The officials have often underscored the importance of supply-side policies as part of the strategy to lower cost pressures. The government has, in recent months, launched a large social housing project in this regard.
This view was re-emphasized by the vice president on Saturday.
"We have five critical areas here. First, food; second, social housing; third, energy; fourth, logistics; and fifth, human resources. We believe that supply-side policies in these five areas will make significant contributions to both our fight against inflation and our balanced and sustainable growth," he said.
Moreover, he highlighted the importance of prioritizing projects and finishing them before new ones are launched.
"That's why we prioritized irrigation projects, especially those that have reached the stage of being completed in the fields. The dam is finished, the main canal is largely completed, only the field work remains. We said, 'Let's focus on those.' We wouldn't be doing the right thing if we distributed our money to new projects and continued before all the projects were finished. We need to prioritize them," he suggested.
Yılmaz's remarks were directed at the development process in Siirt and the wider region, which, in the past, has been long riddled and associated with terror.
"Region 6 incentives are very important. We provided very strong support, especially to labor-intensive sectors," he said, referring to the southeast region.
"In this sense, we supported this with very strong incentives. We continue the same approach today. If the textile and garment industry has developed and reached these levels in the east and southeast, it is thanks to these incentives," he suggested.
At the same time, apart from public investments, which Yılmaz said were "very important," he also pointed out that "private sector investments are just as important."
Turkish authorities have been pursuing a tighter monetary approach since the elections in 2023 to tackle the runaway prices. The central bank has raised interest rates from 8.5% to 50% at one point, but has then turned to easing as inflation pressures began to ease.
Last month, the Central Bank of the Republic of Türkiye (CBRT) lowered its key interest rate by a less-than-expected 100 basis points to 37%, citing firming inflation, pricing behavior and expectations that threaten the disinflation process.
After a brief policy reversal early last year, the bank's rate-cutting cycle resumed in July with a 300-basis-point cut, followed by more subsequent cuts.
The bank has eased by 1,300 points since 2024, when it held rates at 50% for most of the year to anchor inflation expectations.
The CBRT expects inflation to fall to its 16% interim target by the end of 2026, with a projected range of 13%-19%. Markets will closely follow the first inflation report of the year that the bank is scheduled to present this Thursday.
