Fitch: Turkey Needs Tight Monetary Policy for Inflation Control

Fitch Ratings has shown confidence in Türkiye’s ability to maintain tight monetary policy, predicting a gradual easing in the first quarter of 2025. The upgrade of Türkiye’s credit rating to BB- reflects positive economic outlook, with inflation expected to decline sustainably. Senior director Erich Arispe Morales highlighted the government’s commitment to tight monetary policy and fiscal consolidation, essential for improving inflation expectations.

The focus on income policies aligning with the Central Bank’s disinflation process shows a concerted effort to tackle inflation, which remains a key policy challenge. Despite challenges, including slower adjustments in household and firm expectations, Fitch believes in Türkiye’s potential for economic growth through reforms and structural adjustments. Morales emphasized the importance of sustained tight monetary policy for reducing inflation expectations and promoting economic stability.

With the expectation of fiscal policy contributing to disinflation in 2025, investors are anticipating consistent policy frameworks for credibility and reduced political influence risks. Overall, the outlook suggests a gradual shift towards a balanced growth model and improved fiscal policy consistency in Türkiye.