Central Bank Governor Fatih Karahan has likened inflation to a virus, saying it becomes harder to eliminate the longer it lingers in the economy.
“We are applying the right prescription,” he said. “We’ve achieved positive results so far, and we have no doubts about our ultimate goal. But the effect of the prescription varies from case to case.”
Speaking on a television program, Karahan emphasized that their primary objective is to bring inflation down to single digits and eventually stabilize it at 5%.
He outlined three priorities in the Central Bank’s strategy: reducing the FX-Protected Deposit Accounts (KKM), establishing disinflation, and achieving lasting price stability. Karahan said a tight monetary policy has been central to these efforts, with the first visible impact seen in reserve levels.
Gross reserves have increased by over $80 billion, with significant improvement also seen in net terms. Much of this growth, he added, was in Turkish lira, indicating a shift by citizens from foreign currency holdings to lira-based assets.
Karahan also reported major progress in unwinding the KKM mechanism. Once exceeding $140 billion, the balance has now dropped below $1 billion.
Price stability, he stressed, remains the top priority, as high inflation undermines citizens’ welfare. “The root of many economic issues lies in the disruption of price stability,” he said.
Initially projecting inflation could reach as high as 75%—with risks of even higher levels—the Central Bank has since reduced it to below 33%, according to Karahan. He noted that demand conditions now support disinflation and said further progress will depend on recalibrating the tightness of monetary policy through targeted measures.
