The Central Bank, in an open letter 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 Hazine ve Maliye Bakanı Mehmet Şimşek on behalf of the government. The letter reminded that in case the inflation target is not met, according to article 42 of Law No. 1211 on the Central Bank, the CBRT is required to inform the government in writing about the reasons for deviation from the target and the necessary measures to be taken, and to announce it to the public. The letter from the CBRT stated that in the upcoming period, the policy rate will be determined to ensure the required tightness for the anticipated 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 comes from service prices, with adjustments in certain service sectors being made with a certain delay based on the realized inflation. It was emphasized that the inflation realized in determining rent increase rates is of great importance. The letter also mentioned that supply-demand conditions in the housing sector push rent inflation upwards. It was highlighted that rent inflation differs from other service items in terms of both level and inertia. The letter underscored that the CBRT determines its monetary policy stance throughout 2024 to ensure the required tightness for the anticipated disinflation process, taking into account the main trend of monthly inflation and inflation expectations.

EMPHASIS ON TIGHT MONETARY POLICY The CBRT indicated that the policy rate has been raised to 45%, stating that “Improvement in inflation trends, pricing behaviors, and expectations, along with demand conditions that support the decrease in inflation, were prominent in the decision.” It was mentioned that in case of unexpected developments in credit and deposit markets, the monetary transmission mechanism will be supported with additional macroprudential measures. The CBRT emphasized that a tight monetary policy stance will be maintained until a permanent decrease in inflation and price stability are achieved.