The Central Bank, in an open letter sent to the government, stated that “a tight monetary policy stance will be maintained until a permanent decrease in inflation and price stability are achieved.”

The Central Bank of the Republic of Turkey (CBRT) sent an “Open Letter” to the Minister of Treasury and Finance, Mehmet Şimşek, on behalf of the government. The letter reminded that in accordance with Article 42 of Law No. 1211 on the Central Bank, if the inflation target is not met, the CBRT is required to inform the government in writing of the reasons for deviation from the target and the necessary measures to be taken, as well as disclose this information to the public. The letter from the CBRT stated that the policy rate in the upcoming period will be determined in a way that ensures the required tightness for the foreseen disinflation process, taking into account inflation developments, the main trend, and expectations.

“HIGHEST CONTRIBUTION FROM SERVICE PRICES” The letter noted that the highest contribution to consumer inflation came from service prices, indicating that price adjustments in some service sectors are made based on the realized inflation with a certain delay. It was emphasized that the rate of increase in rents is of great importance in determining inflation. The letter mentioned how supply-demand conditions in the housing sector also contribute to raising rent inflation. It was highlighted that rent inflation differs from other service items both in terms of level and inertia. The letter highlighted that the CBRT determines its monetary policy stance throughout 2024 by taking into account the main trend of monthly inflation and inflation expectations to ensure the required tightness for the foreseen disinflation process.

EMPHASIS ON TIGHT MONETARY POLICY The CBRT mentioned that the policy rate was raised to 45%, stating that “The impact of improving pricing behavior, expectations, and the support for the decline in inflation due to improving demand conditions in the main trend of inflation.” It was mentioned that in case of unforeseen developments in credit and deposit markets, the monetary transmission mechanism will be supported with additional macro-prudential measures. The CBRT emphasized that a tight monetary policy stance will be maintained until a permanent decrease in inflation and price stability are achieved.