ISTANBUL: Turkey’s central bank said on Monday its monetary tightening process, which it began last month with a sharp post-election rate hike, is expected to continue until a significant improvement is achieved in the inflation outlook.

The guidance was given in minutes of the bank’s June 22 policy meeting, where it hiked its main interest rate by 650 basis points to 15%, shy of expectations of an even more aggressive policy tightening.

The central bank said the policy reversal, after a two-year easing cycle, was the first step of a tightening process initiated to establish disinflation as soon as possible.

“The deterioration in price stability threatens macroeconomic stability and especially financial stability. Accordingly, the committee decided to implement a monetary tightening process, the steps of which are gradually strengthened when and as necessary,” the central bank said.

“The monetary tightening process is expected to continue until a significant improvement is achieved in the inflation outlook,” it said in a Turkish version of minutes of its monetary policy committee meeting.

Turkish central bank total reserves dropped to $98.5bn

The rate hike came in the first policy meeting under new Central Bank Governor Hafize Gaye Erkan. Before that, the one-week repo rate had dropped to 8.5% from 19% in 2021 despite soaring inflation.

Annual inflation was just below 40% in May after touching a 24-year high above 85% in October last year.

“The committee evaluated that the current monetary policy framework is far from achieving the 5% inflation target, given the inflation outlook and upside risks,” the bank said.