Central Bank President Karahan: The main trend of inflation is showing improvement.

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The President of the Central Bank of the Republic of Turkey (CBRT), Fatih Karahan, is announcing the last inflation report of the year. "Although the main trend of inflation is slower than we anticipated, it is improving," said Karahan:

"THE MAIN TREND OF INFLATION IS SLOWER THAN WE ANTICIPATED"

"Our disinflation process continues. We assess that the slowdown in domestic demand has reached levels that support the decline in inflation. With the effect of this slowdown, the decrease in the current account deficit continues. The main trend of inflation is slower than we anticipated. We will maintain our tight monetary policy stance in a way that will ensure the continuation of disinflation.

"THE INTEREST RATE CUT PROCESS HAS BEGUN"

The global demand outlook continues to be decisive for commodity prices. Central banks in developed countries have begun interest rate cut processes.

Data for the third quarter showed that domestic demand continued to exhibit a moderate trend. Supply indicators in the third quarter were in line with domestic demand. The output gap narrowed in the third quarter. We assess that the narrowing of the output gap in the third quarter will continue in the last quarter of the year. The weakening of the general price increase is occurring with the decline in demand conditions. The output gap will be an important component of disinflation. We expect the cumulative current account deficit to decrease in the third quarter. We anticipate that the positive trend in the current balance will continue.

INFLATION IN THE SERVICE SECTOR IS RESILIENT

We are closely monitoring the main trend of inflation. In October, we see that the decline in the main trend of inflation continues. The improvement in service inflation is slower than we anticipated. The back-to-school effect was significant in service inflation in the third quarter. With the completion of the back-to-school period, the relative price adjustment has largely been completed.

"THERE IS INERTIA IN RENTALS"

We believe it is healthy to look at service inflation in terms of rent and non-rent. We assess that the inertia in rental inflation is higher than we anticipated. Price increases in non-rental services are gradually losing momentum. Leading indicators regarding rent suggest that monthly rental inflation will slow down in the last quarter.

On the industrial side, we see a clear improvement in firms' pricing behavior. Overall, core goods inflation continues to remain low.

There is a positive relationship between the output gap and the diffusion index.

"INFLATION IS NOT AT THE LEVEL WE DESIRE"

With the decline in headline inflation, expectations across all sectors are gradually decreasing. The pace of improvement in expectations is not yet at the levels we desire. With our tight monetary policy stance, we are determined to ensure that expectations contribute to the disinflation process.

We support the tight monetary stance with macroprudential steps. We continue to implement macroprudential policies to enhance the effectiveness of monetary transmission.

Details are coming...