Türkiye's central bank chief said market fallout from the Iran war hurts its fight against inflation, and in such situations it is a "natural choice" to turn to gold-based transactions to support liquidity.
Fatih Karahan, the governor, said in an interview with state-owned Anadolu Agency that the bank is determined to maintain the needed tight policy to continue Türkiye's disinflation process, which began in 2024 but slowed recently.
Annual inflation edged up to 31.5% last month and year-end expectations have risen since the war began a month ago, largely due to soaring global energy prices, Reuters reported.
In response, the central bank has halted its easing cycle with the main rate at 37%, lifted its overnight rate by about 300 basis points to near 40%, and undertaken heavy sales and swaps of forex and gold reserves to support the lira currency.
Total reserves have dropped by roughly $55 billion over the last month. Over the last two weeks, the central bank has begun swapping or selling billions of dollars' worth of gold reserves.
"Using gold-backed transactions during periods when foreign exchange liquidity needs to be supported is a perfectly natural choice," Karahan was quoted as saying by Anadolu on Tuesday.
He said the central bank is pursuing a "proactive, flexible, and controlled" approach to its reserve-management and liquidity tools.
