Türkiye's central bank on Wednesday announced fresh steps to curb lending and discourage foreign exchange demand in the banking sector amid a sliding Turkish lira and some expectations that it may need to hike interest rates more to cool inflation.

The Central Bank of the Republic of Türkiye (CBRT) cut lenders' monthly growth limits to 2% for both commercial and general-purpose loans, from 2.5% to 3%, respectively, to "reinforce its commitment to tight monetary policy stance," it said.

Separately this week, central bank officials have called banks to discuss reasons for the recent rise in foreign exchange demand and asked to remain in frequent contact about the issue, two banking sources said Wednesday.

Last month, the central bank paused an aggressive eight-month policy-tightening cycle that raised the main interest rate by 3,650 basis points to 45%, saying it was high enough to ensure disinflation.

Still, it said the policy could be tightened "in case a significant and persistent deterioration in inflation outlook is anticipated."

Annual inflation rose by a stronger-than-expected 67% in February, prompting JPMorgan to forecast a 500 basis-point rate hike in April following the March 31 local elections.

Month-over-month consumer price inflation (CPI) came in at 4.53%, down from 6.70% in January but still above market forecasts.

Fourth-quarter economic growth data also pointed to strong domestic demand.

On the new measures, Treasury and Finance Minister Mehmet Şimşek on Wednesday reiterated support for the central bank and said disinflation required time.

"Monthly inflation exceeded expectations in February. Disinflation requires time and steadfastness. We will continue to work patiently and diligently until price stability is achieved," Şimşek wrote on social media platform X, formerly known as Twitter.

"Our support to the Central Bank is full," he noted.

"Additional tightening measures by the CBRT will contribute to balancing growth, narrowing the current account deficit, and breaking inflationary trends."

Vice President Cevdet Yılmaz acknowledged the stronger-than-expected inflation reading in February and said the central bank's new measures would be backed by fiscal policy and structural reforms.

"Although it lost momentum compared to January, inflation in February exceeded expectations. In addition to the Central Bank's additional tightening measures, significant results will be achieved in the second half of the year in the disinflation process, supported by fiscal policy and structural reforms," Yılmaz wrote on X.

Separately, for the first time since July, the central bank on Tuesday conducted a $475 million Turkish lira-settled forward foreign exchange selling transaction.

The lira declined this week and fell to as low as 31.751 to the U.S. dollar. It has lost 6% this year.

The central bank's next policy meeting is March 21.

Şimşek on Tuesday said the CBRT considers it has done enough when it comes to monetary policy tightening.

"We have to be patient and committed going forward," he said, believing in the effectiveness of the government's medium-term program, which he says is still in the early stages.

Inflation is expected to remain high in the coming months due to base effects and the delayed impact of rate hikes but would fall in the next 12 months, according to officials.

Price gains are envisaged to peak by mid-year and enter a steep downward trend as of the second half of 2024.

According to Şimşek, inflation "will be back on trend as of March. It will become in line with our disinflation path."

Yılmaz said the fight against inflation would "accelerate significantly in 2025."

"In the medium term (in the perspective of 2026), we are determined to once again achieve single-digit inflation rates within the framework of our sustainable development goals," he added.

In its calls to lenders, including on Tuesday, central bank officials sought "to understand the reasons for the increased foreign currency demand," one of the sources said.

The second source, who, like the first, spoke under condition of anonymity, said the officials told banks to be careful about "unnecessary foreign currency demand."

"The discussion was to understand what is happening and to hinder unnecessary volatility," the second source added.

In its statement outlining loan-growth limits, the central bank also said work was being done to introduce reserve requirements based on loan growth to enhance the effectiveness of the measures.