Breaking News: Central Bank Governor Fatih Karahan announces: Year-end inflation forecast has risen!

Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan presented the 'Inflation Report 2024-II'.

Our Governor Dr. Fatih Karahan is presenting the Inflation Report 2024-II: https://t.co/wHryrkkag0

— Central Bank (@Merkez_Bankasi) May 9, 2024

Stating that the year-end inflation forecast has risen, Karahan said, "We have updated the 2024 year-end inflation forecast by 2 percentage points to 38 percent."

Here are Karahan's statements;

"We are closely monitoring pricing behaviors and inflation expectations.

We are determined to maintain our tight monetary policy stance until inflation declines to levels consistent with our targets.

"LIMITED INCREASE PROJECTED IN GLOBAL GROWTH"

We will absolutely not allow a permanent deterioration in the inflation outlook. The primary objective of the Central Bank is to ensure and maintain price stability.

A limited increase in global growth is projected for 2024. Geopolitical developments and tight policy are prominent global risk factors.

Global inflation continues to hover above targets, and central banks are maintaining monetary tightness. Expectations that central banks of advanced economies will cut interest rates later and more slowly have strengthened.

"INFLATION CAME IN ABOVE OUR FORECASTS"

We are closely monitoring the effects of monetary tightening on domestic demand through various indicators. We anticipate that there will be a weakening in domestic demand in the second half of 2024 due to the lagged effect of monetary transmission, and that the improvement in the current account balance will continue as a result.

Consumer inflation has come in above the projected forecast range. Over the last 3 months, inflation has followed a higher trajectory than our forecasts. Inflation indicators point to a decline in the underlying trend.

We see that price increases in the services group have been stronger recently compared to other groups.

The convergence of inflation expectations to the forecast range is of critical importance for disinflation. We continue to implement macroprudential policies to increase the effectiveness of monetary transmission against divergence in the expectations of economic units and possible volatility.

STATEMENT ON HOUSING PRICES

We are closely monitoring developments in the housing market as a leading indicator. The upward trend in housing prices is slowing down.

The upward trend in housing prices is trailing behind the upward trend in consumer prices. We assess that the slowdown in housing prices may limit rent increases with a lag in the coming period.

"CREDIT DEMAND WILL SLOW DOWN"

We completely terminated the securities maintenance practice as of May 9. By closely monitoring liquidity developments, we will use sterilization tools effectively when necessary.

Our monetary policy stance and macroprudential framework will ensure that deposit interest rates remain at levels that support the transition to the Turkish lira and that savings increase.

Monetary tightening is reflecting on financial markets quickly and strongly. The level reached by loan interest rates will support the slowing of domestic demand.

"NET RESERVES INCREASED BY 34 BILLION DOLLARS"

The additional monetary tightening we implemented at the March meeting has increased the confidence of domestic and foreign residents in the Turkish lira and has been reflected positively in reserves.

We have seen an additional improvement of 18 billion dollars in net reserves excluding swaps in the last two weeks. During this period, net reserves excluding swaps have increased by a total of 34 billion dollars.

INFLATION TARGET ANNOUNCED

We updated the 2024 year-end inflation forecast by 2 percentage points to 38 percent. We maintained the 2025 and 2026 forecasts at 14 percent and 9 percent, respectively.

In the medium term, we aim for inflation to stabilize at 5 percent. The lower and upper bounds of the forecast ranges correspond to 34 percent and 42 percent for 2024, and 7 percent and 21 percent for 2025. Our determined stance in monetary policy will reduce the underlying trend of monthly inflation through rebalancing in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations."

GAVE A DATE FOR THE PEAK

Giving a date for the peak in inflation, Karahan stated that they anticipate inflation will see its peak in May and will be at the 75-76 percent level.

News Source: 12punto