Central Bank of the Republic of Turkey (CBRT) Governor Fatih Karahan evaluated developments regarding monetary policy, inflation, the current account balance, reserves, and financial markets during his presentation at the Turkish Grand National Assembly (TBMM) Planning and Budget Committee.
Karahan stated that there have been recent outflows from money market and similar funds, noting that the majority of these resources have shifted to deposits. Evaluating the currency preference in the transition to deposits, Karahan expressed that the preference for Turkish Lira (TL) is consistent with the current TL share.
There have been recent outflows from money market and similar funds. However, the outflows from these funds have largely shifted to deposits. When we look at the currency composition of the shift to deposits, we see that the preference for TL is consistent with the current TL share.
In his presentation, Karahan also provided messages regarding the disinflation process. Stating that the process is continuing, albeit with a loss of momentum, Karahan noted that the slowdown in inflation is being observed more clearly. He expressed their expectation that disinflation will regain momentum with the waning impact of shocks and the contribution of the tight monetary policy stance.
Stating that upward risks on energy prices persist, Karahan noted that geopolitical developments that came to the fore during the year have affected the disinflation process. He emphasized that the failure to achieve the improvement in inflation expectations projected at the beginning of the year continues to be a risk factor.
MESSAGES ON INFLATION AND RESERVES
Touching upon rent inflation, Karahan said that monthly rent increases, which had been running above services inflation for a long time, have slowed significantly in recent months and have fallen below the services group average. According to Karahan, this outlook weakens the inertia stemming from the rent item in services inflation and points to the possibility that the decline in rent inflation may continue.
In his assessment of the underlying trend of inflation, Karahan reported that the annualized underlying trend had declined to 23.7 percent as of September. Stating that this level is approximately 6 points below the current annual inflation, Karahan said that the fact that the underlying trend remains below annual inflation is a sign that disinflation will continue in the coming period.
Regarding the current account balance, Karahan stated that they expect the increase in the current account deficit to be more limited in the third quarter despite unfavorable external conditions.
Providing information on reserve developments, Karahan stated that gross reserves, which were 210 billion dollars on February 27, fell to 149 billion dollars on June 26 due to the impact of the war, and rose to 171 billion dollars as of September 25. Karahan said that net reserves excluding swaps were at the 40 billion dollar level as of September 25.
Karahan stated that inflation expectations and pricing behaviors will remain important for the course of disinflation in the coming period, and expressed that the CBRT will continue to use all its tools decisively in line with its price stability target.
News Source: 12punto
