07.02.2025 11:02
The Central Bank, which has an inflation forecast midpoint of 21% for the end of the year, was being monitored for any potential changes. Central Bank President Fatih Karahan stated that the tight stance in monetary policy would continue regarding their medium-term forecasts. "Our inflation forecast for the end of 2025 is 24%; we have maintained the forecast of 12 for 2026," he said.
The President of the Central Bank of the Republic of Turkey (CBRT), Fatih Karahan, faced the cameras to announce the first 'Inflation Report' of the year.
Key points from Karahan's statements are as follows:
We assess that domestic demand has reached supportive levels for the decline in inflation, and the main trend of inflation is in a downward trend. We will maintain our tight monetary policy stance in a way that will ensure the continuation of disinflation.
The forecast of a gradual recovery in global growth has been maintained. Energy prices have recently exhibited a volatile trend. Central banks are reducing monetary tightness considering the inflation trend. Market pricing indicates that interest rates will be lowered more slowly in 2025 in both developed and developing countries.
"INDICATORS POINT TO A RECOVERY IN ECONOMIC ACTIVITY"
Production indicators point to a recovery in economic activity. The increase in protectionist tendencies and geopolitical risks are raising downward risks on growth and upward risks on inflation. Demand conditions are at supportive levels for the decline in inflation. As a result of our tight monetary policy, the balanced trend in domestic demand will continue.
"WE EXPECT AN INCREASE IN THE CURRENT ACCOUNT DEFICIT, BUT IT WILL BE LIMITED"
The positive trend in the current account balance continues. We expect an increase in the current account deficit in the upcoming period, but this increase will be limited due to the effects of our tight monetary stance.
Since the last reporting period, inflation developments have been consistent with our forecasts. All indicators point to a gradual slowdown in the main trend. The main trend increased in January in line with forecasts. We anticipate that the main trend of inflation will slow down again in the second quarter after an increase in the first quarter.
"RENT INFLATION IS SLOWING DOWN"
Service inflation is gradually losing strength. The annual decline in services continues. Although rent inflation is high, it is on a slowing trend. The rate of increase in renewed lease contracts is decreasing. We see that the rate of increase in contracts remains below the current annual rent inflation.
"THE ADJUSTMENT IN EXPECTATIONS WILL CONTINUE"
The weakening in producer inflation positively affects inflation in basic goods. The inflation expectations of consumers and firms are also on a declining trend. Recently, we have been observing a clear decline in the inflation expectations of consumers and firms. With our determined stance in monetary policy, the adjustment in expectations will continue.
"WE ARE MAINTAINING A TIGHT MONETARY STANCE"
We are maintaining a tight monetary stance. We support the effectiveness of monetary transmission with macroprudential measures and liquidity management. Thanks to our monetary policy stance and macroprudential framework, the level of deposit interest rates continues to support the transition to the Turkish Lira and savings. We will ensure that consumer credit growth remains on a moderate path. The 5-point reduction in the policy rate has reflected on deposit and loan rates more than we expected.
THE SHARE OF KKM HAS FALLEN TO 5%
Interest and confidence in TL assets continue. While the share of TL deposits approaches 60%, the share of KKM has fallen to 5%. Considering the current level of KKM, we plan to end this application by prioritizing legal entities within the year.
The positive trend in capital inflows continues. In the upcoming period, capital inflows may show volatility depending on global developments.
INFLATION FORECASTS HAVE BEEN RAISED
We predict that the inflation at the end of 2025 will be at the level of 24%. We have maintained the forecast of 12% for 2026 and expect it to decline to 8% in 2027. The lower and upper limits correspond to 19% and 29% for 2025, and 6% and 18% for 2026.
Details are coming...