CBRT addresses disinflation in 'Economy for Everyone' video

As the Central Bank of the Republic of Türkiye (CBRT) continues its tightening cycle, it is also increasing its public communication activities.

The topic of disinflation was addressed in the CBRT's 'Economy for Everyone' video.

Here are the statements included in the video prepared by the CBRT regarding the definition and process of disinflation:

What is disinflation? Why do we want disinflation?

To understand disinflation, one must first talk about what inflation is.

Inflation is the continuous increase in the general price level. Inflation causes more money to be paid over time to maintain the same standard of living.

Disinflation, on the other hand, means a decrease in the rate of price increases.

The process of falling inflation during the transition from high inflation to low inflation is called disinflation. During the disinflation process, the inflation rate decreases.

With disinflation, the purchasing power of money gradually recovers. The savings function of the national currency comes to the fore.

The disinflation process creates an important foundation for the transition to a period of stability where a permanent decline in inflation will be achieved. So, what is disinflation, and why do we want disinflation? We explain it in our 'Economy for Everyone' video: https://t.co/2iWOSTlD3e pic.twitter.com/AD7KPeH6be

— Merkez Bankası (@Merkez_Bankasi) November 27, 2023

Economic units begin to make investment and consumption decisions more soundly.

Thus, uncertainties in the economy decrease and confidence increases. Improvements in income distribution are achieved. The disinflation process creates an important foundation for the transition to a period of stability where a permanent decline in inflation will be achieved.

With the strong monetary tightening we have implemented since June 2023, we are laying the groundwork for the start of the disinflation process and for the decline in inflation to be permanent.

With the achievement of a decline in the underlying trend of inflation, the disinflation process will begin in the second half of 2024.

During the disinflation period, the rate of increase in prices will slow down, and a downward trend in inflation will be observed. With the implemented policies, the exchange rate will gain stability, and improvements in the current account balance, permanent strengthening in capital flows, and an increase in reserves will be seen. With the improvement in expectations, pricing behaviors will normalize.

The disinflation period will be followed by a period of stability.

Inflation will continue its decline and reach single-digit figures.

Predictability and confidence in the economy will increase, and the Turkish lira will maintain its purchasing value. Demand for savings and investment in Turkish lira assets from both domestic and foreign sources will strengthen.

The impact of inflation on economic decisions will fall to a negligible level.

Permanent gains will be achieved for all segments of society in terms of social welfare.

Thus, price stability, which is the most important contribution the Central Bank can make to social welfare, will have been achieved.