The government had said 'it will fall to single digits in 2026': Fitch announces inflation forecast for Turkey

Credit rating agency Fitch Ratings has published the June issue of its Global Economic Outlook Report under the title "Monetary Policy Enters a New Phase."

The report stated that global growth forecasts have been revised upward as confidence in the possibility of a recovery in Europe has increased, China's export sector has revived, and domestic demand in emerging markets outside of China has shown stronger momentum.

Noting that the world economy's growth forecast for 2024 has been raised from 2.4 percent to 2.6 percent, the report stated that the global economy is expected to grow by 2.4 percent in both 2025 and 2026.

'US ECONOMY IS SLOWING GRADUALLY'

The report stated that the US economy is slowing down, but that this is gradual, and the growth forecast for the country's economy has been left unchanged at 2.1 percent for this year. It was reported that the US economy is expected to grow by 1.5 percent in 2025 and 1.6 percent in 2026.

Stating that the growth forecast for the Eurozone economy has been revised upward for this year, the report noted that the growth forecast for 2024 has been raised from 0.6 percent to 0.8 percent. The report projected that the Eurozone economy would grow by 1.5 percent in 2025 and 1.4 percent in 2026.

The report also stated that the growth forecast for the Chinese economy has been raised from 4.5 percent to 4.8 percent for this year, and that the country's economy is projected to grow by 4.5 percent in 2025 and again by 4.5 percent in 2026.

'FED EXPECTED TO START INTEREST RATE CUTS IN SEPTEMBER'

Pointing out that central banks are now moving toward loosening monetary policy, the report stated, however, that inflation remains "surprisingly" persistent and that global interest rates are expected to fall at a "shallower" pace over the next 12-18 months.

The report stated that the global monetary policy cycle has entered a new phase where interest rates will fall to levels that are slow but still restrictive to demand.

Stating that the European Central Bank (ECB) is expected to make two more interest rate cuts this year, the report noted that the US Federal Reserve (Fed) is expected to begin interest rate cuts in September and make another cut in December.

The report stated that central banks are acting cautiously regarding loosening monetary policy too quickly, especially in light of high services inflation.

TURKEY'S INFLATION FORECAST IS 43 PERCENT IN 2024

The report, which also included assessments regarding the Turkish economy, stated that the economy grew above expectations in the first quarter of this year due to a recovery in exports, a sharp decline in imports, and strong domestic demand.

The report stated that Turkey's economic growth forecast for this year has been raised from 2.8 percent to 3.5 percent. It was noted that the economy is expected to grow by 3 percent in 2025 and 3.2 percent in 2026.

Stating that tighter monetary policy, slower credit growth, and the expected tightening of fiscal policy will help reduce inflation this year, and that significant base effects will contribute to a decline in the annual rate starting from July, the report stated that the year-end inflation expectation is 43 percent for 2024, 23 percent for 2025, and 18 percent for 2026.

THE GOVERNMENT HAD SAID IT WOULD FALL TO SINGLE DIGITS IN 2026

Vice President Cevdet Yılmaz had said that inflation would fall to single digits in 2026.

News Source: AA