Fatih Karahan, Governor of the Central Bank of the Republic of Türkiye (CBRT), gave a lecture entitled “Monetary Policy and Inflation Outlook in Türkiye” in Istanbul.
Karahan said: “Disinflation continues, but at a slower pace.” shared his opinion.
Karahan explained that temporary factors are expected to decrease and that adverse weather conditions will lead to an increase in food prices.
Karahan emphasized that inflation in the clothing group shows strong seasonal effects.
Karahan explained that the slowdown in rental inflation is continuing, saying: “Basic inflation indicators point to a slowing in the decline in inflation.” he said.
Karahan noted that inflation expectations have improved but are still at high levels, noting that disagreements among survey respondents have diminished.
The pessimistic trend among market participants has subsided
Karahan noted that the pessimistic tendency among market participants has subsided.
Karahan explained that companies' pricing behavior improved and that industrial production fell slightly while services production stagnated in the third quarter.
Karahan said survey data confirms the slowdown in economic activity. Explaining that retail sales and card spending are following the ongoing decline in consumption, Karahan said: “The composite index of labor market conditions confirms that congestion in the labor market has eased.” he said.
The CBRT president noted that backward-indexing items pushed headline inflation downward, but the fundamental downward trend remained intact.
Noting that market participants respond symmetrically to downside and upside inflation surprises, Karahan made the following assessments:
“General demand indicators show that the equalization continues. The tight monetary policy stance, which must be maintained until price stability is achieved, will reinforce the disinflation process through demand, exchange rate and expectations channels. The Monetary Policy Committee will set the policy rate in a way that ensures the tightness required for the planned disinflation path, taking into account actual and expected inflation as well as the main trend of inflation.”
Stating that the scope of steps to be taken will be carefully reviewed on a meeting basis, with a focus on the inflation outlook, Karahan said: “If there is a significant deviation from the interim inflation outlook targets, the monetary policy stance will be tightened.” he said.
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