Statement on Energy Shocks and Inflation from CBRT Governor Fatih Karahan

Central Bank of the Republic of Turkey Governor Fatih Karahan stated that the effects of energy shocks on inflation could be prolonged and that the reflection of cost pressures on wages and prices needs to be closely monitored.

Effects of Energy Shocks on Inflation

Central Bank of the Republic of Turkey Governor Fatih Karahan explained that while initial energy shocks could be contained with strict measures, the process becomes more complex as cost pressures reflect on wages and prices.

Global Changes and Supply Chains

Pointing out that current energy shocks are lasting longer, Fatih Karahan stated that the global production structure and supply chains are changing, and the pass-through of energy-driven supply shocks to inflation is being monitored.

Second-Round Effects and Pricing Behaviors

Stating that central banks should focus not only on initial price movements but also on inflation expectations and pricing behaviors in the face of supply shocks, Karahan noted that control would become difficult if the shocks spread.

Geopolitical Tensions and Tight Monetary Policy

Conveying that geopolitical tensions in the Middle East create upward pressure on energy prices, Karahan emphasized that a tighter monetary policy is one of the tools that can limit risks against such supply shocks.

Reserve Management and Access Criterion

Making evaluations regarding reserve management as well, Karahan stated that global economic fragmentation affects reserve preferences and that the 'access' criterion has been added to the traditional trinity.

Gold Prices and Stress Periods

Stating that the rise in gold prices can increase the value of reserves but usable liquidity does not increase at the same rate, Karahan expressed that what is truly important is operational usability during periods of stress.