CBRT Governor Karahan announces year-end inflation forecast

The Central Bank of the Republic of Türkiye (CBRT) held the presentation of its second Inflation Report for 2025. The committee, chaired by Fatih Karahan, did not make any changes to the year-end inflation expectation of 24 percent, which was last announced on February 7. In the 1st Inflation Report briefing meeting held on February 7, the inflation forecast range had been 19-29 percent.

Highlights from the speech of CBRT Governor Dr. Fatih Karahan during the meeting presentation are as follows:

'DETERMINED STANCE IN MONETARY POLICY WILL CONTINUE'

"We continue to gradually see the results of our tight monetary policy.

In the face of the volatility experienced in financial markets in March and April, we, as the CBRT, have proactively taken the necessary steps. In the coming period, we will continue our determined stance in monetary policy and act in a way that ensures the continuation of disinflation.

Uncertainty regarding global trade and economic policies remains at high levels. Tariff measures have increased global inflation expectations to some extent.

As a result of the tight monetary policy, the composition of demand has become more balanced. Industrial and service production increased in the first quarter. The labor market is less tight than the headline unemployment rate implies.

Domestic demand, while losing momentum, has remained above projections. In the first quarter, the disinflationary effect of demand conditions decreased.

'RATIO OF CURRENT ACCOUNT DEFICIT TO NATIONAL INCOME HAS RISEN'

We estimate that the ratio of the current account deficit to national income in 2025 will remain below long-term averages, although it will be slightly higher compared to 2024. The disinflation process that began in June 2024 continues uninterrupted.

Data from the last three months point to a horizontal trend in the main trend. Main trend indicators point to the continuation of the disinflation process. After goods inflation, the decline in services inflation is also becoming more pronounced.

Core goods inflation strengthened in April. Current data implies that the exchange rate effect is more limited than in the past. The decline in commodity prices is expected to support disinflation.

SHARE OF PRODUCTS AFFECTED BY AGRICULTURAL FROST IN INFLATION IS 1.5 PERCENT

The share of the 16 products most affected by the recent agricultural frost event in the consumer basket is around 1.5 percent. Inflation expectations continue to remain above our disinflation path. This outlook makes it necessary to maintain our tight and determined stance in monetary policy.

The proactive steps we took within the market functioning supported the tight monetary policy stance. With the effect of the measures taken, volatility in financial markets has decreased.

'TIGHTNESS IN FINANCIAL CONDITIONS CONTINUES'

Tightness in financial conditions continues. The orientation towards foreign currency in portfolio preferences has been limited.

While creating medium-term forecasts, we based our projections on the assumption that we will maintain our tight stance in monetary policy until a significant and permanent improvement in the inflation outlook is achieved.

There has been a recovery in investors' risk perception regarding the Turkish Lira. With the contribution of the steps we have taken, volatility has decreased.

Tightness in financial conditions continues. Commercial loan growth is progressing in line with growth limits.

The decrease in the KKM balance reduces the risks on the CBRT balance sheet."

News Source: 12punto