Türkiye central bank predicts higher inflation, emphasizes monetary rigor

During the presentation of Türkiye’s second inflation report of the year, Fatih Karahan announced a revised inflation forecast and detailed strategic economic interventions to stabilize the economy

During the presentation of the second inflation report of the year, President of the Central Bank of the Republic of Turkiye (CBRT) Fatih Karahan updated the nation’s inflation forecasts and discussed the ongoing economic challenges.

He revised the end-year inflation rate to 38% for 2024, a two-point increase from previous estimates. The bank maintains its forecasts for subsequent years at 14% for 2025 and 9% for 2026, with long-term goals aimed at stabilizing inflation around 5%.

Strict monetary policy awaits Türkiye

During the presentation of this year’s second inflation report, Karahan emphasized the necessity of maintaining a strict monetary policy to curb inflation to acceptable levels.

This stance responds to the inflation rate reaching 69.8% in April, slightly above the projected range by 0.9 points. Karahan pointed out that consumer inflation has consistently exceeded the bank’s forecasts over the past three months.

“We will maintain a strict monetary policy stance as long as inflation does not align with our targets. We will definitely not allow a persistent deterioration in the inflation outlook,” Karahan declared. He reaffirmed the central bank’s core aim to ensure price stability and maintain economic steadiness.

Türkiye’s current real estate market

Discussing the real estate market, Karahan noted the slowing growth rate of housing prices, potentially capping rental price increases. This observation is part of broader economic trends that the CBRT closely monitors to gauge potential inflationary pressures.

Regarding fiscal measures, Karahan emphasized the continued strengthening of the Turkish Lira and the shift from foreign currency deposits to lira deposits. This shift has been supported by a firmer monetary stance, which has also reflected positively on the financial markets, reducing consumer credit growth and increasing Turkish Lira deposit shares.

Improvements in Turkish economy

Karahan also shared positive developments in Türkiye’s reserve positions. “Over the past two weeks, non-swap net reserves have seen an addition of $18 billion, culminating in a total increase of $34 billion for the period,” he said. This improvement in reserves signals a decreasing risk premium and bolstered portfolio inflows into Türkiye.

He concluded by reinforcing the CBRT’s commitment to stringent monetary measures until inflation is stable. “We will continue to do whatever is necessary to bring down inflation in line with our intermediate targets starting from June,” Karahan affirmed.

Source: Newsroom