TCMB: Reserves stronger than previous reserve outflow episodes

Central Bank of the Republic of Turkey (TCMB) Governor Fatih Karahan published his "Inflation and Macroeconomic Outlook" presentation in the United States, stating that annual consumer inflation peaked at 75.5% in May 2024 and, following tight monetary policy and demand rebalancing, fell to 30.9% in March 2026. The presentation was delivered to international investors in Washington and New York.

Karahan noted that the disinflation process has been broad-based across subcomponents, with notable declines in services, food and non-alcoholic beverages, core goods, energy and the alcohol-tobacco-gold category. He highlighted large falls in rental and education inflation over the past year and emphasized that the March reading showed a clear downward trend in core inflation drivers. He also pointed to the launch of the eşel mobil fiscal mechanism on March 5 as a factor limiting pass-through from international energy shocks to domestic prices.

On macrofinancial indicators, Karahan reported signs of slowing domestic demand, weak capacity utilization and a slowdown in credit growth, with credit expansion moderating to around 30.7% in the first quarter. The governor underlined that foreign exchange reserves are in a stronger position compared with earlier outflow episodes and noted a shift in swap-excluded net reserves from deeply negative levels into positive territory, reinforcing external buffers.

These developments carry immediate implications for markets and policy. Broad-based declines in inflation readings and improved reserve metrics can support lower risk premia and ease external financing pressures if sustained. TCMB reiterated its commitment to a sufficiently tight monetary stance until disinflation becomes entrenched, while signaling that it will closely monitor exchange rate and liquidity dynamics.

Analysts said the near-term outlook will hinge on the durability of service-sector disinflation, the pass-through of global commodity shocks and the pace of domestic demand normalization. Continued reserve accumulation and clear progress on core inflation would likely reduce uncertainty and support gradual normalization of financing conditions; conversely, renewed external or domestic price pressures would keep monetary policy on a cautious footing.