Türkiye's central bank has shown how serious it is about ensuring disinflation, which remains its main priority, according to its governor, who said the country is on track to reach its year-end inflation target.

"We have always signaled that we will do whatever is necessary. We have implemented much tighter measures than the markets expected, demonstrating how serious we are about disinflation," Fatih Karahan told a panel in Washington.

The Central Bank of the Republic of Türkiye (CBRT) has raised its key one-week repo rate by 4,150 basis points from 8.5% to 50% since last June, mainly seeking to ease demand, the main driver of inflation that runs at nearly 70%.

After last month's 500 basis point hike that stunned the markets, the bank cited a deteriorating outlook and pledged to tighten even further if it expects the price situation to worsen significantly.

Karahan, in the U.S. to attend the spring meetings of the International Monetary Fund (IMF) and the World Bank, acknowledged that inflation "is our primary concern," as he cited challenges such as high demand and elevated expectations.

"Managing inflation expectations has been challenging," he said. "We have taken significant steps to take inflation expectations under control and are ready to take further action."

Inflation is expected to continue rising toward the midyear before entering what officials expect to be a steep downward trend in the second half of 2024.

Karahan said Türkiye is on the path to reaching its 36% inflation goal by the end of the year, adding that markets believed the target would be achieved with a three-month delay.

He also said that he saw inflation peaking at around 75% in the coming months. The bank sees inflation dropping to 14% in 2025 and 9% in 2026. "We want to return to single-digit inflation," Karahan added.

Türkiye walked away from years of easing policy after last year's presidential and parliamentary elections. It delivered aggressive tightening aimed at cooling demand to curb inflation, rebuilding reserves, and flipping chronic current account deficits to surpluses.

Karahan said they have "done a lot and are ready to do more to regain credibility and reestablish the policy rate as the primary tool."

"Our strategy going forward is that our utmost priority is disinflation, and we will accumulate reserves as much as we can depending on market conditions," he noted.

But he stressed that they "don't want to be in a situation where we increase our reserves by a couple of billion dollars over a month or two but then lose out on the inflation goal."

Net reserves, excluding swaps with commercial lenders, are in negative territory, and the central bank wants to improve that in the medium term, Karahan stressed.

To increase its liquidity reserves, he said the bank had utilized swaps with local banks until the end of 2023.

"As we approach the end of the interest rate hike cycle, both we and local banks are reluctant to rely more on swaps," he noted.

"We plan to reduce swaps with local banks in the coming period."