Economy in Turkey: Central Bank raises year-end inflation forecast

Hafize Gaye Erkan, the President of the Central Bank of the Republic of Turkey (CBRT), has presented the year-end inflation report. The year-end inflation forecast for 2023 has been revised from 58% to 65%. Erkan also shared a forecast of 36% for 2024 and 14% for 2025.

During the press conference for the 4th annual inflation report of the year, Erkan stated that the CBRT’s year-end inflation forecast has been adjusted from 58% to 65%. The Central Bank President expressed that inflation would reach its peak in May 2024, followed by a period of disinflation.

Key points from Erkan’s statements include:

– We are aware that as the Central Bank, the greatest contribution to societal well-being will be through ensuring price stability. Therefore, we are actively fighting inflation with strong monetary tightening measures that we initiated in June.
– The cumulative effects of monetary policy will come into play during the ongoing transition period, and we aim to begin the disinflation process in the second half of 2024.
– September inflation, high-frequency data for October, and all leading indicators indicate that the impact of these shocks on inflation has largely been realized.
– Balancing of demand and support for Turkish Lira savings instruments are crucial in the process of monetary tightening.
– Our selective credit tightening measures aim to maintain balance between supply and demand. With the cumulative effects of monetary tightening, we foresee this gradual balancing to continue.
– Mitigating excess demand and increasing demand for Turkish Lira savings instruments will have a direct and indirect, through the current account channel, decelerating impact on inflation.
– Our determination and consistency in monetary policy, along with our communication policy developed within this framework, aim to increase the weight of Central Bank forecasts in expectation formation by recalibrating expectations.
– With the cumulative effects of our monetary tightening measures, we remain determined to establish disinflation in 2024.