Turkish Vice President Says Government Will Keep Tight Economic Policy

Vice President Cevdet Yilmaz said Turkey will not relax its tight economic policy despite easing inflation, and officials expect disinflation with fiscal support to sustain monetary policy.

Vice President Cevdet Yilmaz said Turkey will maintain a tight economic policy even as inflation shows signs of easing. He told reporters there would be no relaxation of the current program and that adjustments can be made without compromising the framework's scale or resolve. Policymakers began a tightening cycle in mid-2023 and the central bank has since started gradual easing. Headline inflation fell to about 30.9% in December from a peak above 75% in 2024. Key points: - Yilmaz said the government will not relax its current program, while allowing for limited adjustments. - The central bank raised its policy rate to 50% during the tightening cycle and reduced the one-week repo rate to 38% in December. - Headline inflation eased to about 30.9% in December from above 75% in 2024. - Real interest rates are around 7%, which is high relative to many emerging markets. - Officials reported year-end inflation forecasts for 2026 below 20%, compared with market expectations near 23%, and said disinflation in the first quarter should affect price expectations; monetary policy will be supported by fiscal measures. Summary: The announcement signals continued policy restraint as authorities monitor disinflation and price expectations. Officials expect disinflation in the first quarter and plan to keep monetary policy supported by fiscal measures, while leaving room for limited adjustments but not a broad relaxation of the program.