Fatih Karahan: Recent economic and financial developments in Turkey
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Speech by Dr Fatih Karahan, Governor of the Central Bank of the Republic of Türkiye, at the briefing on the Inflation Report 2026-II, Istanbul, 14 May 2026.
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4 itemsTurkey’s central bank signals lower effective funding rate ahead
The Central Bank of Turkey (CBT) signals a potential easing of monetary policy with an anticipated decrease in the effective funding rate from 40% to 37%, aligning more closely with market forecasts. This adjustment comes amid a revised inflation forecast raised to 28%, reflecting ongoing economic considerations and shifting dynamics within domestic demand, as noted by Governor Fatih Karahan. Per the full note [source], the indications towards normalizing liquidity suggest a strategic pivot that could reshape market expectations and positioning in Turkish assets moving forward.
Central Bank of Turkey stays on hold, citing geopolitics
The Central Bank of Turkey (CBT) has opted to hold its key interest rate at 37% amid escalating geopolitical risks and rising inflation driven by surging oil prices, as highlighted in the recent research note. This decision demonstrates the bank's cautious approach against a backdrop of financial stability concerns that have emerged following renewed geopolitical tensions. Notably, the price of oil is nearing $100 per barrel, up from $70-$75 previously, pressing inflation risks higher ('Per the full note [source]...'). The market remains attuned to potential policy shifts, particularly regarding Turkey's liquidity tools, which could impact funding costs down the line, contingent on geopolitical developments.