ANKARA, Turkey (AP) – Turkey’s efforts to rein in inflation through raising interest rates will continue with “determination,” the country’s new central bank chief said Thursday as he followed his predecessor’s policies to revive the devastated economy. He expressed a certain degree of confidence in the rebuilding efforts. Surprise resignation.
Former Goldman Sachs senior executive Fatih Callaghan, speaking for the first time since taking the helm of the central bank on Saturday, said he expects inflation to fall significantly this year and into next.
Karahan, who was the bank’s deputy governor, was part of a new team led by Finance Minister Mehmet Simsek that has been tackling the country’s economic woes through rising borrowing costs.
“We will continue our efforts to eliminate inflation with determination. The central bank’s duty is to ensure and maintain price stability,” Karahan told reporters in Turkey’s capital Ankara.
Callahan replaces Hafiz Gay Erkan, who became the bank’s first female president in June. She announced her resignation late Friday on social media platform X (formerly Twitter), saying she was the victim of a “character assassination campaign” and was stepping down to avoid further tormenting her family.
A leading Turkish newspaper reported last month that her parents were exercising undue influence within financial institutions and that her father had fired his banker. Mr. Elkann vehemently refuted the allegations.
Under Simsek and Erkan, the central bank has approved a series of interest rate hikes to fight inflation, reversing President Recep Tayyip Erdogan’s long-held belief that lower borrowing costs will ease inflation and boost Turkey’s economy. normalized the policy. It goes against conventional economics.
President Erdogan has previously dismissed central bank governors who opposed his unconventional policies and appointed a new economic team after his re-election in May. Economists say his previous policy of keeping interest rates low despite soaring inflation has sparked a currency crisis, raised the cost of living and left households struggling to afford essentials.
Turkey’s central bank recently raised its key interest rate by 2.5 percentage points in January as inflation hit nearly 65 percent.
A series of rate hikes by the central bank have pushed interest rates up from 8.5% in June to 45% late last month, a move widely welcomed by foreign investors who had previously turned their backs on Turkey.
Despite these interest rate hikes, inflation remains high, with consumer prices rising an astonishing 64.86% year-on-year in January, up from 64.77% in December, according to figures released on Monday. did.
Callaghan expects inflation to decline in the coming months.
“The (inflation) forecast for the end of 2024 is estimated at 36%, and the forecast for the end of 2025 is estimated at 14%,” he said.
This figure is likely to remain high. For example, many central banks around the world target 2% inflation and have used a rapid series of interest rate hikes during the COVID-19 pandemic to contain the spike in consumer prices associated with supply chain issues and subsequent increases in food and energy costs associated with Russia’s war in Ukraine.
___
Robert Badendieck contributed from Istanbul.
