CBRT Governor warns repeated energy supply shocks could deepen Turkey’s inflation battle

At a Budapest summit, Central Bank of the Republic of Türkiye Governor Fatih Karahan cautioned that persistent energy supply shocks, heightened by recent attacks in the Middle East, could feed into wages, pricing habits and inflation expectations, complicating the fight against price rises. He explained that while central banks can limit the first-round impact through timely restrictive policies, second-round effects require vigilant oversight.

Karahan emphasized that well-anchored inflation expectations give policymakers more flexibility, yet spreading shocks to exchange rates and wages raise risks, especially for emerging markets. He suggested that tighter monetary policy combined with supportive fiscal actions could mitigate the initial shock, and pointed to a shift toward gold in reserve portfolios due to market fragmentation. Finally, he warned that the evolving global production network and geopolitical competition mean past policy assumptions may no longer hold.