Turkish central bank president projects sharp drop in inflation by 2024’s end

Central Bank of the Republic of Türkiye (CBRT) President Fatih Karahan made a significant announcement during his inaugural meeting with members of the Grand National Assembly of Türkiye’s Planning and Budget Commission. Karahan, in a presentation to the commission, outlined his expectation that by the end of 2024, inflation would plummet to 38%.

Karahan emphasized the central bank’s unwavering commitment to maintaining a stringent monetary policy until inflation aligns with predetermined targets.

No room for permanent inflation disruption

He reassured lawmakers that there would be no tolerance for sustained disruptions in the inflation outlook, affirming, “Our primary goal is continuity in price stability. We are determined to persist with a tight monetary policy until inflation declines in parallel with our targets. Key indicators are pointing towards a downward trend in inflation.”

Additionally, Karahan offered insights into the anticipated economic trajectory for the latter half of the year. He predicted an improvement in the current account balance, attributing it to the expected cautious approach by central banks in developed countries towards interest rate reductions.

Karahan also anticipated a weakening of domestic demand in the latter part of the year, influenced by the surge in food prices, particularly affecting restaurant and hotel tariffs.

Inflation expected to plummet to 38%

Moreover, he highlighted a slowdown in the rate of increase in card-based expenditures and noted that supply conditions were exhibiting a milder trend compared to demand conditions.

Karahan also speculated on the potential impact of the deceleration in housing prices, suggesting it could subsequently limit rental increases in the future.

“We predict that inflation will decrease to 38% by the end of 2024,” Karahan said.

Central Bank withdraws over ₺1.5 trillion in liquidity

In addressing liquidity concerns, Karahan revealed that the Central Bank had withdrawn over ₺1.5 trillion from the market, including an additional ₺550 billion, demonstrating a proactive approach to stabilize economic conditions.

He reiterated the Bank’s vigilance in monitoring liquidity developments and assured the efficient utilization of stabilization tools when necessary.

Karahan’s forecast of a substantial drop in inflation by the year’s end signals a hopeful prospect for Türkiye’s economic stability, underlining the Central Bank’s dedication to achieving and maintaining favorable inflationary outcomes amidst challenging global and domestic economic conditions.