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Turkey’s new central bank governor vows to continue work to tame inflation

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The new governor of Turkey’s central bank has said efforts to get the country’s skyrocketing inflation under control will continue under his leadership while leaving a year-end inflation target of 36 percent unchanged, the state-run Anadolu news agency reported.

Central bank governor Fatih Karahan, a former deputy governor at the bank and previously an economist at the Federal Reserve Bank of New York and the US online retail giant Amazon, appeared before the cameras for the first time since he was appointed to the position on Saturday.

“We will continue our efforts towards disinflation. The duty of the central bank is to ensure and maintain price stability,” Karahan told reporters at a meeting at central bank headquarters in Ankara.

Turkey’s official annual inflation rate peaked at 85 percent in October 2022 and stood at 64.86 percent in January, according to official data.

Karahan was appointed by President Recep Tayyip Erdoğan following the surprise resignation of Hafize Gaye Erkan, a former Goldman Sachs and First Republic Bank executive. Erkan, the first woman governor of the bank, announced her resignation late on Friday, citing a smear campaign against her and her family.

Karahan presented the central bank’s first inflation report during Thursday’s news conference, which kept its year-end and 2025 inflation targets unchanged at 36 and 14 percent, respectively.

The bank’s deputy governor, Cevdet Akçay, said 36 percent inflation for the end of 2024 was an ambitious goal but that it would be an example of an “oxymoron” if the bank had not set an ambitious target.

He said an ambitious but achievable goal to reduce inflation is better than a unambitious goal that can be easily reached.

Former central bank governor Erkan, who in November announced the bank’s fourth quarterly inflation report including inflation projections for year-end 2023, 2024 and 2025, put the inflation forecast for year-end 2024 at 36 percent in a revision from 33 percent. The bank’s inflation forecast for the end of 2023, which was 65 percent, was accurate, with annual inflation at 64.7 percent in December.

Erkan had said she expects inflation to decline from the second half of 2024 while lowering the inflation forecast for end-2025 to 14 percent from a previous 15 percent.

Karahan also said during Thursday’s news conference that he expects the rate of inflation to fall to single digits in 2026.

“We are determined to keep monetary tightening in place until the inflation rate falls to levels in line with our targets,” said Karahan.

A new economy team led by Finance Minister Mehmet Şimşek and included Erkan raised the key interest rate from 8.5 percent to 45 percent since June when they assumed their posts following the elections in May. The bank said last month that the level was sufficient to start easing the cost of living crisis.

The new economic team was able to raise interest rates after President Erdoğan put aside his long-standing objection to the idea that raising interest rates helps fight inflation.

Turkey is scheduled to hold local elections on March 31, and Erdoğan’s ruling Justice and Development Party (AKP) is trying to win back control of major cities, including İstanbul and Ankara, currently held by the main opposition party.

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